One of the most widely watched home-price indicators is showing that property values have hit their highest rate since July 2014.
The S&P/Case-Shiller index of home values in 20 cities increased 5.8 percent in November from a year earlier, the strongest advance in nearly 18 months.
More than any other factor in most communities, low inventories are boosting home prices. Weak equity markets are helping keep mortgage rates low for now, which may help keep home prices aloft as prospective buyers are able to obtain low-cost loans. However, downpayment demands are keeping many first-time homebuyers on the sidelines, as are low or stagnant wages.
Nonetheless, S&P/Case-Shiller says a seller’s market is firmly in place.
“Home prices extended their gains, supported by continued low mortgage rates, tight supplies and an improving labor market,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Sales of existing homes were up 6.5% in 2015 vs. 2014, and the number of homes on the market averaged about a 4.8 months’ supply during the year; both numbers suggest a seller’s market.”
Portland, San Francisco and Denver continue to report the highest year over year gains among the 20 cities with another month of double digit annual price increases. Portland led the way with an 11.1 percent year-over-year price increase, followed by San Francisco with 11.0 percent and Denver with a 10.9 percent increase.
To put things in perspective, the S&P/Case-Shiller index is about 4.8 percent below the peak it set in July 2006, and 29.2 percent above the bottom it touched in January 2012.
“Home prices continue to recover from the collapse that began before the recession of 2007-2009 and continued until 2012,” Blitzer said.