Finance

United States home prices continue upward surge

United States home prices continue upward surgeā€

Low inventory and mortgage rates pushed home prices higher in December, according to the S&P/Case-Shiller U.S. National Home Price Index.

At the same time, the national index for single-family home values in the USA inched up 0.2 percent and is running 5.8 percent higher on a year-over-year basis, a 30-month high. He said that some people might naturally assume that prices are rising too quickly for a normal market and "could be heading for a fall", but he argued against that.

The 10-city index gained 4.9% over the year, up from 4.4% the previous month, while the 20-city index gained 5.6% year-over-year, versus a 5.2% increase in November.

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The cities of Portland and Seattle showed the fastest increase, with average home prices increasing more than 10 percent from the year before.

Year over year, home prices rose 5.8 percent in December, up from November's 5.6 percent annual gain. We expect that prices will continue creeping higher in the months ahead, barring another leg higher in mortgage interest rates. "While sales of existing single family homes passed five million units at annual rates in January, the highest since 2007, the inventory of homes for sale remains quite low with a 3.6-month supply".

Blitzer noted that new hope sales were higher than in recent years, at 555,000 in 2016, but still under the average pace of 700,000 since 1990.

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Historically low mortgage rates are also pushing home prices up, according to Blitzer. The average interest rate on all mortgage loans was 4.17 percent, up 26 basis points from 3.91 in December, while the average interest rate on conventional, 30-year, fixed-rate mortgages of $424,100 or less was 4.37 percent, up 29 basis points from 4.08 in December.

After seasonal adjustment, the national index rose 0.7% month-over-month, while the 10-city and 20-city index rose 0.9% month-over month. Twelve cities reported greater price increases in the year ended December versus the year ended November.

The Case-Shiller index covers roughly half of US homes. In comparing current home price movements to history, it is necessary to adjust for inflation.

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"Looking at real or inflation-adjusted home prices based on the S&P CoreLogic Case-Shiller National Index and the Consumer Price Index, the annual increase in home prices is now 3.8%", he said. Since 1975, the average pace has been 1.3 percent annual growth.



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