United States residential real estate prices rose at the fastest 12-month pace in more than three years in 2017, as potential homebuyers battled over a limited number of available properties.
Standard & Poor’s said recently that its S&P CoreLogic Case-Shiller national home price index jumped 6.3 percent in 2017, the most since June 2014. Residential real estate prices are rising at a much faster pace than wages and the overall measure of inflation.
Steady hiring and overall economic growth are making it easier for more Americans to afford a house, which is then spurring demand. Yet fewer Americans are listing their homes for sale, in some cases because they would face a higher mortgage rate if they were to purchase a new home. The number of homes for sale in January was the lowest for that month on records dating back to 1999.
David Blitzer, managing director at S&P Dow Jones indices, compared the run-up in home prices to the stock market gains of the past year.
“The rise in home prices should be causing the same nervous wonder aimed at the stock market after its recent bout of volatility,” Blitzer said. “We are experiencing a boom in home prices.”
Residential real estate prices in the S&P CoreLogic Case-Shiller 20 city index have soared 62 percent from their low point in the housing market crash, Blitzer said. That represents a much faster pace than the 12.4 percent increase in inflation.
Still, sales of existing homes have been a bit slower in some metro areas across the United States in the past two months and may remain slow in response to some increases in mortgage rates since the beginning of the year. While the average 30-year mortgage rate of 4.4 percent is low by historic standards, which is up from 4 percent at the beginning of the year. These types of increases can sometimes slow sales.
A persistent slowdown in sales could rein in the pace of price appreciation. That might force some homeowners to list their homes for sale, before price gains slowed further, Aaron Terrazas, senior economist at Zillow, said.
Existing home sales across the U.S. dropped in January by the most in three years. New home sales nationwide also fell in January. Unseasonably cold weather may have pulled down sales across the board. It is important to note that though the overall U.S. totals have decreased, metro areas such as Southwest Florida are still experiencing increases in residential real estate sales.