US Home Prices End 2016 on High Note, Case-Shiller Says

The 20-City Composite reported a year-over-year gain of 5.6%, up from 5.2% in November.

The 10-city index increased by 4.9% on the year, up from 4.4%h, and the 20-city index gained 5.6% year-over-year juxtaposed to a previous 5.2% increase.

The newly released report, which tracks 20 major metropolitan areas in the country, shows Miami prices rose 0.3 percent from November to December.

In inflation adjusted terms, house price gains were running at 3.8%, versus an average clip of 1.3% since 1975. "With all 20 cities seeing prices rise over the a year ago, questions about whether this is a normal housing market or if prices could be heading for a fall are natural".

Rising home prices in Charlotte and beyond reflect increased demand for homes, as rising consumer confidence and a good job market encourages potential buyers to get off the fence and buy property.

A lack of supply or low inventories were one factor behind the price gains, according to David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

Higher interest rates tend to put a damper on price growth because they drive up the monthly cost of a mortgage.

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Mortgage rates also had an impact on the rise, Blitzer said: "A 30-year fixed rate mortgage today is 4.2 percent compared to the 6.4 percent average since 1990".

Many analysts expect interest rates to rise this year, which would make it more hard for first-time buyers to get into the housing market.

"Looking at real or inflation-adjusted home prices based on the S&P CoreLogic Case-Shiller National Index and the Consumer Price Index, the annual increase in home prices is now 3.8%", he said.

Blitzer noted that new hope sales were higher than in recent years, at 555,000 in 2016, but still under the average pace of 700,000 since 1990.

Lawrence Yun, chief economist for the National Association of Realtors, wrote in a statement that rising mortgage rates should not be boosting home prices and lack of home construction was a problem in many parts of the nation. With seasonal adjustment, all cities in the 20-City Composite saw prices increase.

Investing.com had forecast a 0.7% MoM seasonally adjusted increase and 5.3% YoY nonseasonally adjusted for the 20-city series.

However, the bubble peak prices are actually lower than where we would have expected home prices to be at this point if they had just continued to rise at their pre-bubble average rate.

  • Ronnie Bowen