The real estate market continues to see one common trend: Home prices continue to climb due to depressed inventory and slow construction activity.
The S&P CoreLogic Case-Shiller National Home Price Index rose 6.2 percent in November, up from 6.1 percent in the previous month — marking the 16th consecutive month of at least 5 percent year-over-year growth.
According to S&P CoreLogic Case-Shiller, the 20-City Composite posted a 6.4 percent year-over-year increase, beating analysts’ estimate of 6.3 percent.
Both annual increases were higher than in the prior month’s release. In a statement, David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said surging prices are all about limited supply of homes to buy.
“Home prices continue to rise three times faster than the rate of inflation. Without more supply, home prices may continue to substantially outpace inflation.”
But there’s another interesting development. Blitzer noted that the markets that enjoyed the fastest price increases before the 2007-2009 financial crisis are again among those cities experiencing the largest gains. These cities include San Diego, Los Angeles, Miami and Las Vegas.
Home prices continue to surge well ahead of inflation and wage gains. Prices were hottest in Seattle, where they rose 12.7 percent compared to a year ago, and in Las Vegas, where they rose 10.6 percent for the year.
Even if the gains are driven by true demand and limited supply rather than a bubble mindset, it doesn’t seem as if the gains are sustainable.
Moreover, Case-Shiller’s numbers are in line with other forecasts.
Real estate data provider Black Knight said U.S. home prices rose 6.44 percent compared to a year ago in November.
Agents and brokers also can expect to face inventory issues in several markets.
According to the National Association of REALTORS®, low inventory levels and slow construction of new homes continue to put pressure on home prices.
NAR reported recently that total housing inventory at the end of December fell 11.4 percent to 1.48 million homes, Blitzer noted that this market 31 consecutive months of year-over-year declines.
“From 2010 to the latest month of data, the construction of single family homes slowed, with single family home starts averaging 632,000 annually. This is less than the annual rate during the 2007-2009 financial crisis of 698,000, which is far less than the long-term average of slightly more than one million annually from 1959 to 2000 and 1.5 million during the 2001-2006 boom years.”