Home Prices Match All Time High

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Home price growth in February bested analyst predictions, expanding 5.8 percent in the latest S&P CoreLogic Case-Shiller Indices.

Prices rolled along to a 32-month high in the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, increasing from 5.6 percent the month prior. The Index’s 10-City Composite rose 5.2 percent, while its 20-City Composite rose 5.9 percent. The 10-City Composite shows an increase from 5 percent the month prior; the 20-City Composite, an increase from 5.7 percent the month prior. Month-over-month, the 10-City Composite rose 0.3 percent and the 20-City Composite rose 0.4 percent.

Of the 20 cities analyzed, Dallas, Texas, overtook recurring top three-ranked Denver, Colo., with prices up 8.8 percent. Portland, Ore., and Seattle, Wash., remained in the top three, with prices up 9.7 percent in Portland and up 12.2 percent in Seattle. The majority of cities analyzed showed higher increases than what was observed the month prior.

According to S&P Dow Jones Indices Index Committee Chairman and Managing Director David M. Blitzer, the price parade will keep marching on so long as supply trails demand.

“Housing and home prices continue to advance,” said Blitzer in a statement. “The S&P Corelogic Case-Shiller National Home Price Index and the two composite indices accelerated since the national index set a new high four months ago. Other housing indicators are also advancing, but not accelerating the way prices are. As per National Association of REALTORS®, sales of existing homes were up 5.6 percent in the year ended in March. There are still relatively few existing homes listed for sale and the small 3.8-month supply is supporting the recent price increases.

“Housing affordability has declined since 2012 as the pressure of higher prices has been a larger factor than stable to lower mortgage rates,” Blitzer said. “Housing’s strength and home-building are important contributors to the economic recovery. Housing starts bottomed in March 2009 and, with a few bumps, have advanced over the last eight years. New-home construction is now closeto a normal pace of about 1.2 million units annually, of which around 800,000 are single-family homes.

“Most housing rebounds following a recession only last for a year or so,” said Blitzer. “The notable exception was the boom that set the stage for the bubble. Housing starts bottomed in 1991, drove through the 2000-2001 recession, and peaked in 2005 after a 14-year run.”

Source: S&P Dow Jones Indices

Summer Home Market is Heating Up!

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The competition for housing is heating up along with the summer temperatures and continuing to set new records. 

The average house sold in May went under contract in just 37 days, that's the fastest reading since Redfin, a real estate brokerage, began tracking the market seven years ago. The previous record, set in April, was 40 days.

Homes are selling faster than ever because supply is tight and demand is high. The number of listings in May was nearly 11 percent lower than in May 2016, leaving just 2.7 months of supply — another record low in the Redfin report. As a reference point, the National Association of Realtors considers a six-month supply to be a balanced market between buyers and sellers.

Denver led the nation in fastest sales, with nearly half of its new listings going under contract in just six days. Seattle came in second at seven days, and Grand Rapids, Michigan; Portland, Oregon; and Omaha, Nebraska; rounded out the top five.

On the inventory side, Rochester, New York, had the largest decrease in supply of homes for sale, down nearly 36 percent compared with a year ago. Buffalo, New York, (-32 percent), San Jose, California, (-31 percent), and Seattle (-27 percent), also saw significant drops in inventory.

The tight supply is only pushing home prices higher. The median price of a home sold in May jumped 6.8 percent compared with a year ago. That is about triple the average income gains and may already be hurting sales, as affordability weakens.

"There is still a lot of momentum in home prices in many metros, not only on the coasts but also in places like Buffalo, Grand Rapids and Omaha," said Redfin's chief economist, Nela Richardson. "Strong local economic growth and burgeoning demand from older millennials are accelerating home-price growth in this very competitive, low-inventory, pre-summer market."

Richardson is not concerned about the latest hike in short-term interest rates by the Federal Reserve. Mortgage rates do not follow the Fed rate directly, but track the yield on the 10-year Treasury bond, which is at its lowest since the presidential election last November. Rates are expected to move higher at some point, as the central bank continues to shrink its balance sheet of mortgage-backed securities.

"If anything, it may motivate buyers to make their purchases sooner rather than later," she added.
The current interest rate on the popular 30-year fixed conforming loan is hovering just above 4 percent. If rates were to hit 5 percent, most homebuyers said they would not change their homebuying plans, according to a survey commissioned by Redfin last month. About a quarter of those surveyed said it would increase their urgency to buy, but rates at 5 percent would not change their plans to buy a home.