Prices of homes in the U.S. for October saw an increase of 5.2% from the previous year, according to the latest S&P/Case-Shiller U.S. National Home Price Index released on Dec. 29. The 10-City and 20-City Composites both showed year-over-year improvements as well, rising 5.1% and 5.5%, respectively.
“Generally, good economic conditions continue to support gains in home prices,” says David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “Among the positive factors are consumers’ expectations of low inflation and further economic growth as well as recent increases in residential construction, including single-family housing starts.”
Among the 20 cities surveyed, San Francisco, Denver and Portland reported the highest year-over-year gains. Phoenix had the longest streak of year-over-year increases, while 12 cities reported higher price increases in the year ending October 2015 compared to the year ending September 2015. After a seasonal adjustment, the National Index reported month-over-month increases for all 20 cities surveyed.
The recent Federal Reserve increase, Blitzer explains, are leaving some to wonder if mortgage interest rates will rise. Between May 2004 and July 2007, the Fed rate increased from 1% to 5.25%, and over the same time frame, the mortgage rate increased from 6% to 6.75%. According to the latest economic projections, the Fed will increase its current rate of 0.5% to 2.6% in September 2017. “These data suggest that potential home buyers need not fear runaway mortgage interest rates,” Blitzer added.
- Jennifer Lehman, NACM marketing and communications associate