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Case-Shiller Reports Home Prices Rise at Fastest Pace in 7 Years

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Case-Shiller Reports Home Prices Rise at Fastest Pace in 7 YearsS & P Case-Shiller Home Price Indices reported the fastest pace of U.S home price growth in seven years. National home prices grew by 10.40 percent year-over-year in December as compared to November’s reading of  9.50 percent home price growth on a year-over-year basis.

The S&P Case-Shiller 20-City Home Price Index reported home price growth in 18 of 20 cities included in the index. Detroit, Michigan did not report home price data for December. Phoenix, Arizona held the top position in the 20-City Index for the 19th consecutive month with year-over-year home price growth averaging 14.40 percent. Home prices in Seattle, Washington home prices held second place with year-over-year growth of 13.60 percent. San Diego, California home prices grew 13.00 percent year-over-year.

The Federal Housing Finance Agency released home price data for homes owned or financed by Fannie Mae and Freddie Mac. Home prices rose by 10.80 percent in the fourth quarter of 2020 as compared to home prices in the fourth quarter of 2019. Home prices reported by FHFA rose by 3.80 percent between the third and fourth quarters of 2020.

Idaho home prices reported by FHFA rose by 21.10 percent year-over-year.  Montana home prices grew by 15.50 percent; Utah followed closely with 15.40 percent home price growth. FHFA reported the highest pace of home price growth for cities in Boise, Idaho; home prices in San Francisco, California grew at the slowest pace. This data supports the trend of homeowners moving from costly metro areas to inland suburbs where they can buy larger homes for lower prices.

Rapidly Rising Home Prices Impact Affordability

While homeowners welcome quickly rising home prices, affordability issues worry real estate analysts and prospective home buyers. The covid-19 pandemic caused home prices to rise as homeowners fled congested urban areas for suburban and rural areas.

Supplies of available homes fall as demand for homes keeps rising during the pandemic. Millennials are in their peak home-buying years but many current homeowners are waiting out the pandemic to sell. Low inventories of available homes and rising building materials costs add to the shortage of homes in general and affordable homes in particular.

First-time and moderate-income home buyers face increasing challenges as home prices and mortgage rates rise. Mortgage approval standards are difficult to meet as rising home prices cause housing payments and down payment requirements to increase. In addition to property taxes and hazard insurance, buyers who cannot pay 20 percent down must also pay for mortgage insurance.

Skyrocketing home prices should ease when demand for homes slows, but that won’t happen until supplies of available homes catch up to buyer demand.

What’s Ahead For Mortgage Rates This Week – September 28, 2015

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Whats Ahead For Mortgage Rates This Week September 28 2015Last week’s scheduled economic news included reports on new and existing home sales, the FHFA House Price Index, weekly reports on mortgage rates, and new jobless claims. The week finished with a report on consumer sentiment.

Existing Home Sales Fall as New Homes Sales and Home Prices Rise

The National Association of Realtors reported that home sales for pre-owned homes fell in August. Analysts expected sales of existing homes to reach a reading of 5.52 million sales on an annual basis, but the actual reading was 5.31 million existing homes sold as compared to July’s reading of 5.58 million pre-owned homes sold. Rising home prices were cited as a primary reason for the drop in sales.

FHFA’s House Price Index for July reflected the trend of rising home prices; July’s reading was 0.60 percent as compared to June’s reading of a 0.20 percent increase in home prices associated with homes with mortgages owned by Fannie Mae or Freddie Mac.

Sales of newly built homes reached the highest level since early 2008 in August, evidence that demand for housing is strengthening heading into the fall. Home builder sentiment is at its highest level in nearly a decade according to a survey earlier this month from the National Association of Home Builders

Mortgage Rates Fall

Freddie Mac reported that average mortgage rates fell on Thursday; the rate for a 30-year fixed rate mortgage was 3.86 percent; the average rate for a 15-year mortgage was 3.08 percent and the rate for a 5/1 adjustable rate mortgage  dropped by one basis point to 2.91 percent. Discount points were 0.70, 0.60 and 0.50 percent respectively.

Jobless Claims Also Rise As Consumer Sentiment Fell.

The number of Americans seeking unemployment benefits rose slightly last week yet remained at a low level consistent with solid job growth. The Labor Department says weekly applications for jobless aid rose 3,000 to a seasonally adjusted 267,000. The four-week average fell to a 15-year low last month.

The University of Michigan says consumers lost confidence for the third straight month in September, worried about bad news about the global economy. Consumer sentiment index fell to 87.2 this month, lowest since October 2014 and down from 91.9 in August. Richard Curtin, Chief Economist for the survey, said consumers are worried about signs of weakness in the Chinese economy and continued stresses on Europe’s economies.

What’s Ahead

This week’s economic reports include Pending Home Sales, the Case-Shiller Home Price Index, Core Inflation, ADP Employment and the government’s Non- farm Payrolls report. The national unemployment rate and Consumer Confidence Index for September are also slated for release this week.

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