Let\’s talk about home prices again concerning have been numerous reports of eroding affordability and fears that individuals might be topping out just five short years after hitting the lowest.
For example, the National Association of Realtors recently noted that your median existing-home price in February was up 7.7% to $228,400 from the year earlier (February 2016: $212,100), the fastest pace since last January (8.1%).
It also marked the 60th consecutive month of year-over-year gains, which if you are doing the math, is five full many years of gains.
A month ago, NAR chief economist Lawrence Yun described the rapid price appreciation as \”concerning\” mainly because it was doubling the pace of revenue growth.
Meanwhile, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index (I\’m like this title needs to be longer) chalked a 5.9% annual gain in January, up from 5.7% per month earlier.
The index also hit a 31-month annual return high, which forced Managing Director and Chairman of the Index Committee David M. Blitzer to treat affordability concerns.
He argued that while higher home prices and mortgage rates may dent affordability reducing the number of households able to purchase homes, the issue of inventory and strength from the economy means we likely won\’t go to a change in direction just yet.
Blitzer did admit \”at some point\” market forces would drive prices down, but said, \”we are not appearing to be there yet.\”
Supply and Demand Imbalance
I think everyone feels identically, that prices are too darn high, it\’s just that no one knows when prices will fall, or due to the fact much. And what the catalyst can be, other than affordability or a not enough willing buyers.
Everyone is speaking about the current situation as an inventory crisis, with numerous potential move-up buyers trapped as a result of limited equity and/or a low type of loan they don\’t want to let go.
That further limits the actual of starter homes, keeping renters outside the market as they watch home values creep higher and higher.
In fact, Trulia reported that national housing inventory hit its minimum level on record during the first ninety days of 2017. I believe their data only goes to 2012 though.
Still, the present numbers are troubling – starter and trade-up home inventory fell 8.7% and 7.9%, respectively, year-over-year. And there wasn\’t much in 2009 either-
Basically, this means the entire housing market ecosystem is beyond whack, with no sign of relief in the near future.
Are Home Prices Really Expensive?
To add insult to injury, home might not even be that high, assuming you appear at \”real home prices,\” those adjusted for inflation, wage growth, rates of interest, etc.
The First American Real House Price Index (RHPI) measures single-family ideals after accounting for changes in incomes and interest rates.
They use median household income and increasing to determine how much a particular consumer have enough money for. This allows them to measure house-buying power and also affordability.
What we wind up with is definitely a difficult picture than what you would possibly see with other home price charts.
For example, real housing prices are still 33.3% below their peak affecting July 2006, not that we should measure a good market based on that turbulent time. Still, the correct answer is a margin.
Additionally, real ideals are 10.3% lower than they had been in the year 2000.
Now can that every one change in a hurry? Sure, and it\’s also. In just the past year, real house prices surged by 8.2%.
If both rates on mortgages and home prices continue to rise, we\’ll hit another breaking point suddenly, assuming wage growth can\’t sustain.
First American chief economist Mark Fleming noted that regardless of this, \”affordability in most markets is still high by historical standards.\”
As such, he expects another strong spring real estate season. Or at least lots of interest, despite an absence of inventory.