Surprise, surprise…Phoenix pulled ahead of Seattle in the S&P CoreLogic Case-Shiller National Home Price Index (HPI) in October 2018.

Las Vegas had the highest y/y price gains (+12.8 increase), San Francisco had the second highest y/y price gains (+7.9%) and Phoenix had the third highest y/t price gains (+7.7%). Nationally, home price gains averaged a +5.5% gain in October, according to the HPI.

(Remember that this report has a two-month lag time.)

“Home prices in most parts of the US rose in October 2018 from September 2018 and from a year earlier,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at the S&P Dow Jones Indices. Blitzer continued. “The combination of higher mortgage rates and higher home prices rising faster than incomes and wages mean fewer people can afford to buy a home.”

Andrew LePage with CoreLogic also noted under separate cover that the principal-and-interest mortgage payment on a median priced home in 2018 rose by +16% due to the 0.8 percentage point rise in mortgage interest rates over this last one-year period. These calculations mirror Blitzer’s above comment about fewer people being able to afford to buy a home.

Anticipating home prices and mortgage costs for 2019, CoreLogic predicts median home prices to rise by nearly 5%. A consensus forecast by multiple sources points to mortgage payments climbing by 11.3% in 2019 due to a one-half percentage point increase in interest rates by the Federal Reserve by the end of 2019. (The Federal Reserve has a difficult situation to balance in a time of increased uncertainty and volatility – raising rates too quickly could drive a recession and not raising rates could drive inflation.)

Either way the Fed goes, affordability or lack of affordability is central to the fate of the housing market in 2019. We already see the results of lack of affordability in the rise of Phoenix over Seattle in these current numbers. Will Phoenix soon become another Seattle or will Phoenix again completely bottom out as it did in 2012?