No Flip-Flop in Home Prices Expected.
Nationwide, unemployment is down and new job creation has been rising at a very promising rate, residential rents are increasing in all major metro areas and mortgage interest rates are still low… the perfect storm for a stable Real Estate market. Due in part to a long-term lack of inventory, home prices have been on a slow and steady upward trajectory and according to U.S. National Home Price Index’s 10-City Composite, should remain strong. CoreLogic revealed in a recent post, its prediction of a 5% rise in home prices by end of Summer 2018. Anywhere from 5 to 7 percent is considered ‘average’.
In the Phoenix Valley area house and condominium rents are up $150/mo on average, and in spite of massive construction projects, rents on apartments are up $50, according to AZCentral. Metro Phoenix home prices rose 7% since this time last year, though a slight moderation in increases has spurred a small flurry of home buying activity for early Fall.
Home Prices ‘Unlikely’ to Reverse Course
Home prices increased in the latest S&P CoreLogic Case-Shiller Indices, up 5.8 percent year-over-year in June, compared to 5.7 percent in May. By comparison the Greater Phoenix Valley saw a 7% increase in the same time-frame.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index’s 10-City Composite rose 4.9 percent year-over-year, down from 5.0 percent in May, while its 20-City Composite rose 5.7 percent year-over-year, identical to May. Month-over-month, the 10-City Composite and the 20-City Composite both rose 0.7 percent.
Of the 20 cities analyzed for the Index, Dallas, Texas, Portland, Ore., and Seattle, Wash., came out on top, with prices up 7.7 percent year-over-year in Dallas, 8.2 percent in Portland and 13.4 percent in Seattle.
“The trend of increasing home prices is continuing,” says David M. Blitzer, chairman of the Index Committee and managing director at S&P Dow Jones Indices. “Price increases are supported by a tight housing market. Both the number of homes for sale and the number of days a house is on the market have declined for four to five years.
“Currently the months supply of existing homes for sale is low, at 4.2 months,” Blitzer says. “In addition, housing starts remain below their pre-financial crisis peak as new-home sales have not recovered as fast as existing-home sales.
“Rising prices are the principal factor driving affordability down,” says Blitzer. “However, other drivers of affordability are more favorable: the national unemployment rate is down, and the number of jobs created continues to grow at a robust pace, rising to close to 200,000 per month. Wages and salaries are increasing, maintaining a growth rate a bit ahead of inflation. Mortgage rates, up slightly since the end of 2016, are under 4 percent. Given current economic conditions and the tight housing market, an immediate reversal in home price trends appears unlikely.”