According to the most recent Case-Shiller Home Price Index, home prices hit another all time high in June, increasing 5.8% year-over-year. The index, which covers all nine U.S. census divisions, established a new peak for the seventh consecutive month. Although home prices were generally expected to begin cooling by now, don’t bet on a home price reversal just yet. The National Index reached a new high of 192.60, up from last month’s peak high of 190.61 and Los Angeles had the highest index reading at 263.57.
“The trend of increasing home prices is continuing,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.
“Price increases are supported by a tight housing market. Both the number of homes for sale and the number of days a house is on the market have declined for four to five years. Currently the months supply of existing homes for sale is low, at 4.2 months. In addition, housing starts remain below their pre-financial crisis peak, as new home sales have not recovered as fast as existing home sales. Given current economic conditions and the tight housing market, an immediate reversal in home price trends appears unlikely.”
In other housing-related news, U.S. consumer confidence surged to a five-month high in August as households grew increasingly optimistic about the labor market and continued home price appreciation.
The conference board said its consumer confidence index increased to a 122.9 this month from 120.0 in July. That was the strongest reading since March when the index hit a 16-year high of 124.9, (August was also the second-highest reading since 2000.)
“Despite a daily dose of worrying headlines, consumers still have plenty to be confident about right now. Home prices are rising, stocks are just off record highs and the labor market is churning out jobs,” said Robert Kavcic, a senior economist at BMO Capital Markets in Toronto.
“That should continue to support solid consumer spending growth through the rest of the year.”
Finally, sales of existing homes which include single-family, townhouses, condos, and cooperative apartments slipped 1.3% from their June level to a seasonally adjusted annual rate of 5.44 million units, the lowest sales rate thus far in 2017, according to a report released by the National Association of Realtors, (NAR.) Single-family home sales decreased 0.8% in June and were 1.7% above June 2016, while the median existing-home price for all housing types was $258,300, up 6.2% from $243,200 in July 2016.
Lawrence Yun, NAR chief economist stated, “Home prices are still rising above incomes and way too fast in many markets. Realtors continue to say prospective buyers are frustrated by how quickly prices are rising for the minimal selection of homes that fit buyers’ budget and wish list. Contract activity has mostly trended downward since February and ultimately put a large dent on closings last month.”