NEW YORK CITY—A shortage of product is continuing to drive single-family home prices higher, with the latest S&P CoreLogic Case-Shiller Indices once again showing faster annual gains they they had in the previous month. In turn, that shortage is helping to keep sales volume down, in the view of the National Association of Realtors.

All three Case-Shiller indices—National, 10-City Composite and 20-City Composite—posted higher annual gains in November compared to October, S&P Dow Jones Indices said Tuesday. National represented a 6.2% annual gain for the month, up from 6.1% in October, while the 10-City Composite came in at 6.1% growth year over year, up from 5.9% in the previous month and the 20-City's Y-O-Y increase was 6.4%, compared to 6.3% in October.

“Home prices continue to rise three times faster than the rate of inflation,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “The S&P CoreLogic Case-Shiller National Index year-over-year increases have been 5% or more for 16 months; the 20-City index has climbed at this pace for 28 months.”

Blitzer adds that with population and income both growing slowly since the financial crisis, “demand is not the primary factor in rising home prices.” Nor is a rise in construction costs, although these costs have increased between 2% and 4% annually since the downturn.

Instead, Blitzer points to the slow pace of new builds. “From 2010 to the latest month of data, the construction of single family homes slowed, with single family home starts averaging 632,000 annually,” he says. That's less than the annual rate of 698,000 starts during the 2007-2009 financial crisis, which in turn is far less than the long-term average of slightly more than one million annually from 1959 to 2000 and 1.5 million during the 2001-2006 boom years. “Without more supply, home prices may continue to substantially outpace inflation.”

The latest Marcus & Millichap National Multifamily Index puts the Seattle metro area at the top of 46 markets for rental demand, and the latest Case-Shiller data support this. Seattle led all other US cities in home price growth for November, with prices up 12.7% Y-O-Y. Las Vegas came in second with 10.6% Y-O-Y increases, and the top five is rounded out by San Francisco, San Diego and Tampa, which saw Y-O-Y increases of 9.1%, 7.4% and 7.1%, respectively.

NAR said last week that existing-home sales slipped in December, although the housing market for 2017 overall was buoyed by a multi-year streak of employment growth, and posted its best results since '06. “At the same time, market conditions were far from perfect,” says NAR chief economist Lawrence Yun. “New listings struggled to keep up with what was sold very quickly, and buying became less affordable in a large swath of the country. These two factors ultimately muted what should have been a stronger sales pace.”

Along with a 3.6% decline in home sales, December also saw housing starts ease off in seasonal fashion. Single-family starts fell 11.8% to a seasonally adjusted annual rate of 836,000 units, although the three-month rolling average for single-family production reached a post-recession high. Meanwhile, multifamily starts ticked up 1.4% from November to 356,000 units.

“A return to normal levels of housing production this month is expected after a very strong fall season,” said NAHB Chief Economist Robert Dietz. “We saw a surge of housing activity in the South after hurricane-related delays, and now that region is returning to its positive growth trend.”

Instant Insights /

Low Supply Drives Ongoing Home Price Gains

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