The Case-Shiller index released this morning revealed an annual price appreciation that increased slightly, but was mostly flat. Overall, this is a good sign for the housing market and consistent with other positive housing indicators that were recently released. Here are my thoughts:
- While the appreciation in home prices picked up slightly, it is still slower than what we’ve seen over the two years. This lack of monthly growth suggest steadier market conditions and is a welcomed change because it indicates a more sustainable housing recovery and a balance between buyers and sellers. The National Home Price Index increased a 4.3% from last May, which is slightly higher than the 4.2% increase in April 2015.
- A slower pace of growth is a good news for potential home buyers because it means the housing market will be less frenzied. In the last couple of years, many have been discouraged by rapid price increases and bidding wars. On the other hand, a slowdown in home prices may discourage some home sellers from listing their homes. When adjusted inflation prices are about 20% below the peak nationally – and at levels seen in 2003, though prices have exceeded the previous peaks in some metros, such as in Denver and Dallas.
- Variation in home price appreciation rates reflects varying local economies. Robust increases in prices persists in markets with the strongest job growth, but also where inventories of homes available for sale have been tight. The highest annual increases were in again in Denver, San Francisco and Dallas, which all which posted a robust gain of around 10% year over year.
- Although the Case-Shiller index lags compared to other home price indices (as it accounts for price changes between March and May), it is accounting for the impact of mix of sales, and suggests that prices are in effect rising more timidly. The 10-City Composite increased 4.7% from last May, while the 20-City Composite increased 4.9% during that the same period. The slight pick up in price gains is consistent with previously released data indicators, thought we may see some slowing in Case-Shiller index growth again in the next couple of months