Home Prices See Biggest Jump Since 1988

CHICAGO—The Chicago metropolitan area recorded the greatest year-over-year gain in its home prices since December 1988, according to the latest S&P/Case-Shiller US National Home Price Index, just published by the S&P Dow Jones Indices. Since last year, the data through October show that Chicago-area prices increased by 10.9%. This was, however, still below S&P's 20-city composite of 13.6%.

“Home prices increased again in October,” says David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. Furthermore, “annual returns have been in double-digit territory since March 2013 and increasing; now up 13.6% in the year ending in October. However, monthly numbers show we are living on borrowed time and the boom is fading.”

After a long stretch of price increases, some of the data coming in show that housing prices may finally be approaching their peak. For example, “Atlanta, Boston, Chicago, Cleveland, Dallas, Denver, San Francisco, Seattle and Washington were the nine cities that declined month-over-month; two of them, Denver and Dallas, are slightly off their peak set last month.” But the picture remains mixed, Blitzer adds, and most forecasts still point to single-digit growth in 2014.

Other Midwestern cities included in the study were Cleveland, Detroit and Minneapolis. Cleveland has lagged behind other American cities for quite some time and continues to recover slowly. Its prices increased only 4.9% over the year, the slowest rate of increase among the metro areas studied, with the exception of New York. And although Detroit posted a 17.3% gain, its prices still remain far below other cities. The much healthier Minneapolis market scored in the double-digits as well, with a gain of 11.3%.

“The key economic question facing housing is the Fed's future course to scale back quantitative easing and how this will affect mortgage rates,” says Blitzer.