Home Prices Continued To Rise In October, Affordability Remains A Concern

Mortgage Orb - Patrick Barnard - 27 December 2016

U.S. home prices increased 0.2% on an unadjusted basis in October compared with September and were up 5.6% compared with October 2015, according to the S&P CoreLogic Case-Shiller home price index (HPI) report.

On an unadjusted basis, the report’s 10-city composite was unchanged compared with September but was up 4.3% compared with October 2015. The 20-city composite increased 0.1% month over month and increased 5.1% year over year.

After seasonal adjustment, home prices nationally are estimated to have increased 0.9% month-over-month, while both the 10-city and 20-city composites increased 0.6%.

Seattle, Portland and Denver reported the highest year-over-year gains among the 20 cities over each of the last nine months.

In October, Seattle led the way with a 10.7% year-over-year price increase, followed by Portland with 10.3%, and Denver with 8.3%.

Ten cities reported greater price increases in the year ended October versus the year ended September, according to the Case-Shiller report.

Thirteen of 20 cities reported increases in September before seasonal adjustment; after seasonal adjustment, all 20 cities saw prices rise.

“Home prices and the economy are both enjoying robust numbers,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in a statement. “However, mortgage interest rates rose in November and are expected to rise further as home prices continue to out-pace gains in wages and personal income. Affordability measures based on median incomes, home prices and mortgage rates show declines of 20 percent to 30 percent since home prices bottomed in 2012. With the current high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends. Nevertheless, home prices cannot rise faster than incomes and inflation indefinitely.”

Blitzer points out that after the S&P CoreLogic Case-Shiller National Index bottomed in February 2012, its year-over-year growth accelerated to a peak rate of 10.9% in October 2013 and then gradually fell to its current rate of approximately 5%.

“During the same period, the highest year-over-year rate from any city was 29 percent in August and September 2013; currently the highest single city gain declined to approximately 11 percent,” he says. “Both national and city growth in home prices slowed but remains above the growth rate of incomes and inflation.”

Meanwhile, Black Knight Financial Services’ recently released HPI report also shows that U.S. home prices increased 0.2% on an adjusted basis in October compared to September and were up 5.6% compared with October 2015.

The average price for a single-family home in the U.S. was $266,000, according to the mortgage software firm’s data and analytics division. States that saw the biggest increases in home prices, month-over-month, included New York (0.7%), Florida (0.7%), Washington (0.7%), New Jersey (0.6%) and Idaho (0.5%).

Black Knight claims its HPI is one of the most accurate because it utilizes repeat sales data from the nation’s largest public records data set, as well as the firm’s own loan-level mortgage performance data. Importantly, the report factors in data from non-disclosure states, which do not include property sales price information as part of their publicly available county recorder data.

In addition to the Black Knight and Case-Shiller reports, the Federal Housing Finance Agency (FHFA) also recently released its monthly HPI, which also shows that U.S. home prices increased 0.4% in October compared with September. However, the FHFA report puts the year-over-year increase at 6.2%.

All three reports use a slightly different methodology to arrive at their estimates. The FHFA’s report uses home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.