The S&P CoreLogic Case-Shiller National Home Price NSA Index covering all 9 U.S. census divisions gained 6.1% annually in August, up from 5.9% in the previous month. The 10-City Composite annual increase came in at 5.3%, up from 5.2% the previous month.
The 20-City Composite posted a 5.9% year-over-year gain, up from 5.8% the previous month. Since President Donald J. Trump took office, the S&P CoreLogic has hit no less than three historic highs, and home prices have become an enormous source of wealth in what has been a low-wage economy.
However, this year, wages have finally begun to grow.
“Home price increases appear to be unstoppable,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “August saw the National Index annual rate tick up to 6.1%;all 20 cities followed in the report were up year-over-year while one, Atlanta, saw the seasonally adjusted monthly number slip 0.2%.
Seattle, Las Vegas, and San Diego reported the highest year-over-year gains among the 20 cities. In August, Seattle led the way with a 13.2% year-over-year price increase, followed by Las Vegas with an 8.6% increase, and San Diego with a 7.8% increase. Nine cities reported greater price increases in the year ending August 2017 versus the year ending July 2017.
“Most prices across the rest of the economy are barely moving compared to housing. Over the last year the consumer price index rose 2.2%, driven largely by energy costs,” Mr. Blitzer said. “Aside from oil, the only other major item with price gains close to housing was hospital services, which were up 4.6%. Wages climbed 3.6% in the year to August.”
On a monthly basis, the National Index posted a gain of 0.5% before seasonal adjustment in August. The 10-City and 20-City Composites also increased 0.5% and 0.4%, respectively. Seasonally adjustment, the National Index posted a 0.5% month-over-month increase in August, while the 10-City Composite and 20-City Composite both posted 0.5% month-over-month gains. Nineteen of 20 cities reported increases in August both before and after seasonal adjustment.
The Federal Housing Finance Agency (FHFA) survey known as the House Price Index (HPI) has shown even more relative strength than the S&P CoreLogic Case-Shiller Index, rising 0.7% in August and easily beating the 0.4% median forecast. The previously reported 0.2% increase in July was revised upward to 0.4%.
Analysts said the rise in home prices poses questions of why prices are climbing and whether they will continue to outpace most of the economy.
“Currently, low mortgage rates combined with an improving economy are supporting home prices. Low interest rates raise the value of both real and financial long-lived assets. The price gains are not simply a rebound from the financial crisis; nationally and in nine of the 20 cities in the report, home prices have reached new all-time highs,” Mr. Blitzer added. “However, home prices will not rise forever. Measures of affordability are beginning to slide, indicating that the pool of buyers is shrinking.The Federal Reserve is pushing short term interest rates upward and mortgage rates are likely to follow over time, removing a key factor supporting rising home prices.”