The heat appears to be coming off home prices, albeit very slightly. Nationally, values rose 6.4 percent annually in April, down from a 6.5 percent gain the previous month, according to the S&P CoreLogic Case-Shiller National Home Price Index.
The nation’s 10 largest cities saw price gains of 6.2 percent in April, down from 6.4 percent in the previous month. The 20-City Composite posted a 6.6 percent year-over-year gain, down from 6.7 percent in the previous month.
“Home prices continued their climb,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “Cities west of the Rocky Mountains continue to lead price increases with Seattle, Las Vegas, and San Francisco ranking 1-2-3 based on price movements in the trailing 12 months. The favorable economy and moderate mortgage rates both support recent gains in housing.”
The biggest factor heating home prices is the pervasive shortage of homes for sale. Supply is increasing very slightly month-to-month, but is still considerably lower than one year ago.
Ten of the top 20 cities are currently higher than their peaks from 2006, not accounting for inflation. The national index is also above its last peak.
“However, if one adjusts the price movements for inflation since 2006, a very different picture emerges,” noted Blitzer. “Only three cities – Dallas, Denver, and Seattle – are ahead in real, or inflation-adjusted, terms. The National Index is 14 percent below its boom-time peak and Las Vegas, the city with the longest road to a new high, is 47 percent below its peak when inflation is factored in.”
Demand for housing continues to outpace supply, even as mortgage rates increase. The nation’s home builders saw higher sales in May, but they are still not increasing production at the rate the market needs. They are also more focused on the move-up than the entry-level markets.