Home prices tracked in the S&P/Case-Shiller U.S. National Home Price Index rose 5.4% in January, year-over-year, led by another month of double-digit increases in West Coast cities.
Portland saw the biggest increase in prices from the previous January (11.8%) followed by Seattle (10.7%) and San Francisco (10.5%). Eleven cities reported higher price increases, year-over-year, while the northeast reported the weakest growth.
“Home prices continue to climb at more than twice the rate of inflation,” said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. And although the sale and construction of new homes has fallen behind sales gains for existing homes, this trend may be reversing, Blitzer said, as single-family starts in February were the highest reported since November 2007. Single-family units were 70% of the total housing starts in February, an increase from 57% in June 2015 and near the 75% to 80% range approached before the housing crisis.
Still, financing for potential purchasers of new homes, particularly for those with significant credit card or student loan debt, remains a barrier, Blitzer said.
“While rising home prices are certainly a factor deterring home purchases, individual financial positions are more important than local housing market conditions,” Blitzer said. “One hopeful sign is that the home ownership rate, at 63.7% in the 2015 fourth quarter, may be turning around. It is up slightly from 63.5% in the 2015 second quarter but far below the 2004 high of 69.1%.”
Other, year-over-year increases from January 2016 by city:
Los Angeles, 6.9%
San Diego, 6.9%
Las Vegas, 6.0%
- Nicholas Stern, NACM editorial associate