S&P: Home Price Gains Hit New High

NEW YORK CITY-Residential sales prices, among the most battered of economic fundamentals during the downturn, continued rallying this spring, with S&P Dow Jones Indices reporting the biggest gains for its S&P/Case-Shiller Home Price Indices in years. Average single-family and multifamily home prices increased 11.6% and 12.1% for the 10- and 20-City Composites, respectively, in the 12 months ending in April. Month over month, the two indices rose 2.6% and 2.5%, respectively.

“The recovery is definitely broad based,” David Blitzer, chairman of the index committee at S&P Dow Jones Indices, says in a release. “The two composites showed the largest year-over-year gains in seven years,” while both composites also posted “their highest monthly gains in the history of S&P/Case-Shiller Home Price Indices.” As a result, home prices are now back at early-2004 levels, according to S&P Dow Jones Indices.

All 20 cities measured by S&P/Case-Shiller and both composites showed positive year-over-year returns for at least the fourth consecutive month. Atlanta, Dallas, Detroit and Minneapolis posted their highest annual gains since the start of their respective indices.

Atlanta, Las Vegas, Phoenix and San Francisco posted year-over-year gains of more than 20% in April, with San Francisco leading at 23.9%. Phoenix has now posted 12 consecutive months of double-digit growth, according to S&P Dow Jones Indices. On a monthly basis, all cities with the exception of Detroit posted positive change; the results for Michigan's largest city were flat.

Some recent news has the potential to cloud the horizon, although Blitzer expresses optimism. He notes that last week's comments from the Federal Reserve, and the resulting sharp increase in Treasury yields, “sparked fears that rising mortgage rates will damage the housing rebound." However, he says, "Homebuyers have survived rising mortgage rates in the past, often by shifting from fixed rate to adjustable rate loans.”

Over the course of the housing boom, bust and recovery, Blitzer says, “banks' credit quality standards were more important than the level of mortgage rates. The most recent Fed Senior Loan Officer Opinion Survey shows that some banks are easing credit restrictions. Given this, the recovery should continue.”

In the view of Patrick Newport and Stephanie Karol, US economists with IHS Global Insights, the law of supply and demand is helping power the residential recovery. “Home prices are going up nearly everywhere because of shortages,” they write. “Construction of single-family homes has been depressed since late 2007 in nearly every state. Meanwhile, the US population has increased by more than 12 million” during that time.