Thursday, February 14, 2013 / by Pedro Romero
Home Price Indices Indicate Sustained Recovery For 2013
The most recent Case-Schiller Home Price Indices showed home prices rose 4.5% for the 10-City Composite and 5.5% for the 20-City Composite in the previous 12-months. Prices rose in 19 of the 20 cities in the 20-City composite and fell only in New York. In the 19 cities price increase continued to accelerate than the month previous. Phoenix led with the fastest price rise – up 22.8% year over year as it posted its seventh consecutive month of double-digit annual returns. On the downside, Chicago was again amongst the weakest with a drop of -1.3%.
Appreciation & Home Price Indices
Winter is usually a weak period for housing which explains why we now see about half the cities with falling prices on a month-to-month basis; compared to last summer which saw 20 out of 20 with prices last summer. The better annual price changes point to seasonal weakness rather than a reversal in the housing market. Further evidence that the weakness is seasonal is seen in the seasonally adjusted figures: only New York saw prices fall on a seasonally adjusted basis.
Regional patterns are shifting as well. The Southwest - Las Vegas and Phoenix - are staging a strong comeback;With the Southeast - Miami and Tampa close behind. The sun-belt, which bore the brunt of the housing collapse, is back in a leadership position. California is also doing well while the northeast and industrial Midwest is lagging somewhat.Housing is clearly recovering. Prices are rising as are both new and existing home sales. New Home sales were the highest since June 2010. These figures confirm that housing is contributing to economic growth.
According to economists at Core Logic as we close out 2012 the pending index suggests prices will remain strong. Given that the recently released Qualified Mortgage rules issued by the Consumer Financial Protection Bureau are not expected to significantly restrict credit availability, the gains made in 2012 will likely be sustained into 2013. For the first time in almost six years, most U.S. markets experienced sustained increases in home prices in 2012. With a long way still to go to return to 2005-2006 levels, all signals currently point to a progressive stabilization of the housing market and the positive trend in home price appreciation.
The National Association of Realtors also believes momentum is continuing to build in the housing market. NAR economists say pent-up demand is sustaining the market. Record low mortgage interest rates clearly are helping many home buyers. Still, tight inventory and restrictive mortgage underwriting are limiting sales. Buyers who stayed on the sidelines during the recession are starting to enter the as their financial ability and confidence steadily grow.
Likely job creation and household formation will continue to fuel growth leading to both sales and prices posting gains in 2013. Although mortgage interest rates should gradually rise as the year progresses, they’re expected to stay below 4 percent during the first half of 2012, meaning qualified buyers generally can stay well within their means.
The most broadly based index, the US Federal Housing Finance Agency’s House Price, also reports signifcant upward movement of single-family house prices. The FHFA HPI is based on 6,000,000 same home sales and reports U.S. house prices rose 0.6% in the latest month-over-month measure. For the most recent 12-month period prices reportedly rose 5.6% on a year over year basis.
The FHFA Home Price Index is still 15.2% below its April 2007 peak and is roughly the same as the August 2004 index level. National home prices have not declined on a monthly basis since January 2012, representing 10-consecutive months of increase and demonstrating a strong base of stability from to build sustained recovery.