Home prices increased across the U.S. in February, picking up the pace in annual price gains, according to the latest report released by S&P Dow Jones Indices and CoreLogic.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. Census divisions, increased by 6.3% annually in February, up from January’s increase of 6.1%.
The 10-City Composite increased at an annual rate of 6.5%, up from its increase of 6% the previous month. The 20-City Composite also increased, rising 6.8%, compared to its increase of 6.4% in January.
“Home prices continue to rise across the country,” said David Blitzer, S&P Dow Jones Indices managing director and chairman of the index committee. “The S&P CoreLogic Case-Shiller National Index is up 6.3% in the 12 months through February 2018. Year-over-year prices measured by the National index have increased continuously for the past 70 months, since May 2012.”
“Over that time, the price increases averaged 6% per year,” Blitzer said. “This run, which is still ongoing, compares to the previous long run from January 1992 to February 2007, 182 months, when prices averaged 6.1% annually. With expectations for continued economic growth and further employment gains, the current run of rising prices is likely to continue.”
But while the nation is averaging increases around 6%, home prices in some cities are rising at a much faster rate, the report shows. Seattle, Las Vegas and San Francisco reported the highest annual gains with increases of 12.7%, 11.6% and 10.1% respectively.
“Increasing employment supports rising home prices both nationally and locally,” Blitzer said. “Among the 20 cities covered by the S&P CoreLogic Case-Shiller Indices, Seattle enjoyed both the largest gain in employment and in home prices over the 12 months ended in February 2018.”
“At the other end of the scale, Chicago was ranked 19th in both home price and employment gains; Cleveland ranked 18th in home prices and 20th in employment increases,” he said. “In San Francisco and Los Angeles, home price gains ranked much higher than would be expected from their employment increases, indicating that California home prices continue to rise faster than might be expected. In contrast, Miami home prices experienced some of the smaller increases despite better than average employment gains.”
In all, thirteen of the top 20 cities reported higher price increases for the year ending in February than for the year ending in January.
Monthly, before seasonal adjustment, the National Index increased 0.4% from January to February. The 10-City and 20-City Composites each increased 0.7% month-over-month.
After seasonal adjustment, the increases were slightly higher at 0.5% for the National Index and 0.8% for the 10-City and 20-City Composites. All 20 cities reported increases in February before and after seasonal adjustment.
One expert explained these rapidly rising home prices are creating problems for homebuyers, especially those on the lower end of the market.
“The kind of sustained, rapid home price growth we’ve been seeing in Case-Shiller and other indices for the past few years is enough to give home buyers of all stripes a headache,” Zillow Chief Economist Svenja Gudell said. “But that pain is especially acute for first-time and lower-income buyers at the bottom end of the market in search of entry-level homes that are appreciating the fastest, in large part because they are in the most demand.”
“Competition is fierce, offer windows are short and tensions will inevitably run high for many buyers as the spring shopping season unfolds,” Gudell said, telling buyers who are hoping for more inventory soon: Don’t hold your breath, it could take years.
Another expert agreed, saying the only way to combat the problem is by building more entry-level homes.
“There is no let-up to rising home prices,” said Lawrence Yun, National Association of Realtors chief economist. “The Case-Shiller Index and National Association of Realtors median home price both show gains of roughly double the average wage growth.”
“Even as the tightening job market is starting to boost incomes, those looking to buy are facing a double whammy of fast rising home prices and higher mortgage rates,” Yun said. “The way to make housing more affordable is to build more homes, particularly smaller-sized entry level homes and condominiums.”