Home price growth in December was led by activity in Denver, Portland and Seattle, with annual gains of 8.9 percent, 10 percent and 10.8 percent, respectively. Prices for higher tier homes in Portland (more than $411,335) and Seattle (more than $532,716-plus) have been “stable” in the past five years, while prices for lower tier homes in Portland (less than $296,361) and Seattle (less than $335,111) have been “volatile”—movement that, according to Blitzer, signifies normality in the market.
“In the boom-bust of 2005-2009, prices of low, medium, and high tier homes moved together, while in other periods, including now, the tiers experienced different patterns,” says Blitzer.
The Index’s 10-City Composite posted a 4.8 percent annual gain and a 0.9 percent monthly gain, while the 20-City Composite posted a 5.6 percent annual gain and also a 0.9 percent monthly gain.
Home prices are continuing to be pressured by rising rates and supply shortages.
“One factor behind rising home prices is low inventory,” Blitzer says. “While sales of existing single-family homes passed 5 million units at annual rates in January, the highest since 2007, the inventory of homes for sales remains quite low with a 3.6 month supply. New-home sales at 555,000 in 2016 are up from recent years, but remain below the average pace of 700,000 per year since 1990.
“Another factor supporting rising home prices is mortgage rates. A 30-year fixed rate mortgage today is 4.2 percent, compared to the 6.4 percent average since 1990.”
Source: S&P Dow Jones Indices