Home prices in January rose at
their fastest rate since mid-2014, a trend that bodes well for sellers but
could ultimately start to dampen buyer demand this spring selling season.
The S&P CoreLogic Case-Shiller
Indices, which cover the entire nation, rose 5.9% in the 12 months ended in
January, the strongest increase in 31 months, up from a 5.7% year-over-year
increase reported in December.
The 10-city index gained 5.1%
over the year, up from 4.8% the prior month, and the 20-city index gained 5.7%
year-over-year, up from a 5.5% increase in December.
Economists surveyed by The Wall
Street Journal expected the 20-city index to climb by 5.6%.
The strong growth in prices poses
a challenge for first-time buyers trying to get into the market this year.
“This spring market looks to be
heated. There are a far larger number of buyers chasing after fewer
inventories,” said Lawrence Yun, chief economist at the National Association
of Realtors. “Prices are easily outpacing people’s income growth” which is
causing “consternation for renters who are trying to get into the homeownership
market.”
The hottest markets in the
country remain concentrated in the northwest. Seattle led the way with a 11.3%
increase, Portland reported a 9.7% year-over-year gain and Denver had a 9.2%
annual increase in home prices.
Home prices hit a new record in
September and have continued climbing by more than 5% year-over-year since
then, driven by strong demand and a shortage of homes for sale. Inventory in
December hit its lowest level since 1999, when the National Association of
Realtors started tracking the data.
The number of homes for sale was
down 7.1% in January compared with a year earlier, the realtors said. It has
since ticked up slightly but inventory in February remained 6.4% below a year
earlier.
Tight supplies and rising prices
may be deterring some people from trading up to a larger house and also
shrinking the number of households that can afford to buy at current price
levels, said David Blitzer, managing director at S&P Dow Jones
Indices. “At some point, this process will force prices to level off and
decline—however we don’t appear to be there yet.”
Month-over-month, the U.S. Index
rose 0.2% in January before seasonal adjustment, while the 10-city rose 0.3%
and the 20-city index increased 0.2% from December to January.
After seasonal adjustment, the
national index rose 0.6% month-over-month, while both the 10-city and 20-city
index rose 0.9%.
Purchases of previously owned
homes declined in both January and February, as tight inventory and rising
prices frustrated would-be buyers. Existing homes sells declined 3.7% in
February, the National Association of Realtors said.
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