The pace of price increases continued virtually unchanged in March with greater year-over-year appreciation in ten of the 20 cities tracked by S&P Dow Jones Indices than in February. The National Home Price Index which covers all nine U.S. Census Divisions slipped slightly with a 4.1 percent annual gain in March compared to 4.2 percent the previous month. The 10-City Composite Index was up 4.7 percent on an annual basis and the 20-City rose 5.0 percent, virtually the same annual increases they posted in February.
San Francisco and Denver led in annual gains. San Francisco's 10.3 percent increase was its first in double digits since last July and Denver was up 10.0 percent followed by Dallas at 9.3 percent. Among the ten cities reporting higher appreciation in March than in February the largest differential was in Tampa, up 1.4 percent. Cleveland had the largest deceleration, down 1.2 percent compared to the annual growth in February.
All three indexes grew significantly on a month-over-month basis. The National Index rose 0.8 percent and the 10-City and 20-City Composites were up by 0.8 percent and 0.9 percent respectively compared to 5 percent for each in February. San Francisco was again in first place with a jump of 3.0 percent followed by Seattle with a 2.3 percent gain. New York was the only city to report a loss with a 0.1 percent decline for the month.
David M. Blitzer, Managing Director and Chairman of the S&P Dow Jones Index Committee said, "Home prices have enjoyed year-over-year gains for 35 consecutive months. The pattern of consistent gains is national and seen across all 20 cities covered by the S&P/Case-Shiller Home Price Indices. The longest run of gains is in Detroit at 45 months, the shortest is New York with 27 months. However, the pace has moderated in the last year; from August 2013 to February 2014, the national index gained more than 10 percent year-over-year, compared to 4.1 percent in this release.
"Given the long stretch of strong reports, it is no surprise that people are asking if we're in a new home price bubble. The only way you can be sure of a bubble is looking back after it's over. The average 12 month rise in inflation adjusted home prices since 1975 is about 1.0 percent per year compared to the current 4.1 percent pace, arguing for a bubble. However, the annual rate of increase halved in the last year, as shown in the first chart. Home prices are currently rising more quickly than either per capita personal income (3.1 percent) or wages (2.2 percent), narrowing the pool of future home-buyers. All of this suggests that some future moderation in home prices gains is likely. Moreover, consumer debt levels seem to be manageable. I would describe this as a rebound in home prices, not bubble and not a reason to be fearful."
As of March 2015, average home prices for the MSAs within the 10-City and 20-City Composites are back to their autumn 2004 levels. Measured from their June/July 2006 peaks, the peak-to-current decline for both Composites is approximately 15-16%. Since the March 2012 lows, the 10-City and 20-City Composites have recovered 29.8% and 30.7%.
The S&P/Case-Shiller Home Price Indices are constructed to accurately track the price path of typical single-family homes located in each metropolitan area provided. Each index combines matched price pairs for thousands of individual houses from the available universe of arms-length sales data. The S&P/Case-Shiller National U.S. Home Price Index tracks the value of single-family housing within the United States. The index is a composite of single-family home price indices for the nine U.S. Census divisions. The indices have a base value of 100 in January 2000; thus, for example, a current index value of 150 translates to a 50% appreciation rate since January 2000 for a typical home located within the subject market.
