DC Housing Returns At Low End

WASHINGTON, DC-Washington DC housing prices posted a disappointing monthly return of 1.0%, according to S&P/Case-Shiller Home Price Indices. The increase was hardly emblematic of the nation as a whole, which has seen home prices steadily increasing in recent years. The National Index grew 7.1% in the second quarter and 10.1% over the last four quarters. The 10-City and 20-City Composites posted returns of 2.2% for June and 11.9% and 12.1% over 12 months.

"The Southwest and California have consistently led the recovery with Las Vegas, Los Angeles, Phoenix and San Francisco posting at least 15 months of gains," David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. He noted that New York recorded its highest monthly return since 2002 and that Atlanta was up the most at 3.4%.

As GlobeSt.com reported yesterday, US home prices, including single-family houses as well as apartments, posted the best year-over-year gain since 2006, according to the indices--although a slowdown in the rate of increase suggests that it may have peaked.

A likely contributor to the slowdown in rising mortgage rates. Since this past May, Blitzer says, “applications for mortgages have dropped, suggesting that rising interest rates are affecting housing.” The Federal Reserve's announcement last week that QE3 bond buying will continue for the time being "may have only a limited, though favorable, impact on housing."

And Patrick Newport, US economist at IHS Global Insights, notes that inventory shortages are to drive home price increases. “Construction of single-family homes has been depressed since late 2007, while the US population has increased by more than 12 million over that time,” he says.

Given that IHS estimates that underlying demand is running at a rate nearly twice that of housing completion, "the shortages are likely to get larger before getting smaller," Newport says. That means increases in the Case-Shiller indices are likely to continue for awhile yet, “even if they retreat some from the current pace.”

Meanwhile, the numbers on the rental side are likely to continue posting gains across the board. The USC Lusk Center reported on Tuesday that it's expecting two more years of apartment rent increases across Southern California.