December home prices rose by 0.10 percent according to the Case-Shiller 20-City Home Price Index. The composite report tracks home prices in 20 U.S. cities. December’s results boosted home prices by 4.50 percent year-over-year, which is approximately double the inflation rate for 2014. Analysts note that the overall reading was less significant than individual readings for the 20 cities included in the report.
Regional Home Prices Suggest Disparity in Housing Recovery
The top three month-to-month home price increases for cities surveyed were led by Miami, Florida with an increase of 0.70 percent, Home prices rose by 0.50 percent in Denver, Colorado, and by 0.50 percent in San Francisco, California.
Chicago, Illinois posted a month-to-month loss of -0.90 percent; Cleveland, Ohio followed with a loss of -0.50 percent, and Las Vegas, Nevada and Minneapolis, Minnesota were tied with monthly losses of -0.30 percent for home prices.
Winter weather conditions and the holidays can dampen demand for homes; it’s worthwhile to note that three of the cities posting the largest month-to-month losses are located in cold winter climates.
Month-to-month readings for home prices are typically more volatile; the corresponding year-over-year readings provide a more accurate reading of real estate trends in specific cities. Nine cities posted month-to-month gains for home prices, while six cities posted lower home prices from November to December.
San Francisco Leads Year-over-Year Home Price Growth
San Francisco, California led year-over-year home price growth with a reading of 9.30 percent. Home prices grew by 8.40 percent in Miami, Florida. Denver, Colorado home prices grew by 8.10 percent year-over-year in December.
The three cities showing the least amount of home price growth year-over-year were Chicago, Illinois with a reading of 1.30 percent, Cleveland, Ohio and Washington, D.C. were tied with year-over-year readings of 1.30 percent growth in home prices year-over-year.
Home prices are growing more slowly in the North and Midwest regions, while home prices continue to grow fastest in the Southeast and Western regions.
Home prices in the cities surveyed have increased by 29 percent since the March 2012 low, but remain 16 percent below their July 2006 peak. The Case-Shiller Home Price Index measures home prices using a three-month rolling average, while other home price reports base their readings on monthly sales. Case-Shiller’s year-over-year reading of 4.50 percent for December of 2015 closely approached CoreLogic’s reading of 5.00 percent home price growth year-over-year.
While increasing home prices are good news for homeowners, higher home prices represent an obstacle for moderate income and first time home buyers, who are also impacted by strict mortgage credit standards. As the peak home buying season approaches, increased demand for homes could drive home prices higher.
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About the Author:
Babak Moghaddam graduated from University of Southern California in 1985. He entered the mortgage industry as a compliance auditor at the Bank of New York in 1986 and completed his masters in Business Administration two years later. After seventeen years in the traditional mortgage banking world Babak finally transformed this vision into his own practice in 2002 when he formed Charter Pacific Lending Corp, a mortgage company that has provided over $900 Million in residential real estate loans throughout Southern California. Babak and his team do things a little differently than other mortgage providers. They work as financial advisors, because they have come to realize that a mortgage is a very powerful financial tool. And just like any other financial tool, it should be managed as part of the overall financial management plan to reach every home owner’s long and short-term financial goals much faster. You can contact Babak for a free consultation and strategy session at (800) 322-1217 X103.