Leading Housing Market Index Reaches New High: Some Still Worried

MoversNational
Posted By Arthur Murray on December 7, 2016 at 6:12 pm
Leading Housing Market Index Reaches New High: Some Still Worried

The most recent S&P CoreLogic Case-Shiller Index, one of the most respected statistical analyses of the U.S. housing market, shows home prices continued to climb in September, reaching a new high. The previous record was set in July 2006, at the height of the housing boom.

The annual price gain nationally in September was 5.5 percent, up from 5.1 percent in August. The index sets prices in January 2000 as its baseline.

The index also tracks prices in 20 housing markets. The highest year-over-year gains in the 20 markets covered occurred in Seattle, Portland, and Denver. Seattle’s increase from 2015 was 11.0 percent; Portland’s was only slightly lower at 10.9 percent, while Denver’s hike was 8.7 percent.

The smallest increases among the 20 markets came in New York City, with 1.8 percent. Washington, D.C., reported prices were up 2.7 percent.

housing market stats

So what does it all mean?

As with many questions, answers about where the housing market stands depend on whom you ask?

David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, sees somewhat of a mixed message from the indexes. “The new peak set by the S&P Case-Shiller CoreLogic National Index will be seen as marking a shift from the housing recovery to the hoped-for start of a new advance.”

But it isn’t that simple. “While seven of the 20 cities previously reached new post-recession peaks, those that experienced the biggest booms – Miami, Tampa, Phoenix and Las Vegas – remain well below their all-time highs. Other housing indicators are also giving positive signals: sales of existing and new homes are rising and housing starts at an annual rate of 1.3 million units are at a post-recession peak.”

Other promising numbers add to the picture, Blitzer says. “Real disposable personal income per capita – income after inflation and taxes on a per-person basis – rose 1.9%, outpacing home prices over the entire period. The stock market, measured by the S&P 500 adjusted for inflation, did better at 4.4% per year.”

That means everything in the housing market is great, right? Not necessarily, Blitzer warns: “We are currently experiencing the best real estate returns since the bottom in July of 2012 when prices rose at a 5.9% real annual rate. Given history, this trend is unlikely to be sustained.”

Other view of the U.S. housing market

Mike Deighan, managing director of O’Keefe CPA LLC, a Farmingdale, NY, firm that specializes in real estate and other services, expects growth to continue even if interest rates continue a recent upward trend. “Provided rates don’t spike above a point or more, there should not be significant effects on housing market growth,” Deighan says. “The market has known for months that the rates are expected to go up.”

He does have one fear for the market. “Demand and growth will depend on where inflation goes,” Deighan says. “It is important to note that home mortgage rates are still extremely low by historical standards. For that reason, the growth may be a little choppy but should still continue its upward path.”

Peter Vekselman, an Atlanta-based real estate investor and principal in Yates Estates Keller Williams, isn’t so sure about continued growth. “Steady job growth and a low unemployment rate have had a large role in helping many areas, including those western cities, such as Denver, Portland and Seattle, maintain solid numbers for home ownership,” he says. “However that could change. Fewer homes are being built in those areas (Seattle for example) and potential changes in mortgage rates and other factors by the new administration could play a big role in what happens in the future. The affordability and ease of purchasing a home could be impacted greatly.”

A sobering note

Even if all goes well with the Trump administration, Vekselman has one other concern – the next crop of homebuyers. “Eventually the market will reflect the growing number of millennials,” he says. “Many millennials are having a tough time finding the kind of work they want to launch their career paths. A large number are living with their parents or renting space. They have no urgency to get married and buy a home, if they can even get one.”

Arthur Murray
Arthur is managing editor of GoodCall, directing its newsroom. He has nearly 30 years of newspaper and magazine experience. A native of Virginia, Arthur attended the University of North Carolina at Chapel Hill and graduated with a bachelor's in journalism.

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