Home Prices, Sales Tick Upward

Yun sees “promising resilience” in the single-family residential market.

WASHINGTON, DC—The residential market’s recovery continues to strengthen, with the latest reports from both the National Association of Realtors and S&P Dow Jones Indices showing upward movement. However, the National Association of Home Builders reported last week that builder confidence in January went in the opposite direction.

NAR reported Tuesday that existing-home sales inched upward 0.4% in January to a seasonally adjusted annual rate of 5.47 million, the highest annual rate in six months, while subpar supply levels propelled price growth by 8.2% year over year, the fastest increase since last April. “The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints,” says Lawrence Yun, chief economist at NAR. “Despite the global economic slowdown, the housing sector continues to recover and will likely help the US economy avoid a recession.”

At S&P Dow Jones, the Case-Shiller index of home property prices in 20 cities increased 5.7% Y-O-Y in December 2015, unchanged from the previous month. Analysts polled Tuesday by Bloomberg Business had called for a median annual increase of 5.8%. Prices rose in all 20 cities; the national increase from the year-ago period was 5.4%.

“While home prices continue to rise, the pace is slowing a bit,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “Seasonally adjusted, Miami had lower prices this month than last and 10 other cities saw smaller increases than last month. Year-over-year, seven cities saw the rate of price increases wane.” However, Blitzer notes that “even with some moderation, home prices in all but one city are rising faster than the 2.2% year-over-year increase in the CPI core rate of inflation.”

Although the news from NAR was good when it came to existing-home sales, NAHB members appear less sanguine about the prospects for newly built product. The latest National Association of Home Builders/Wells Fargo builder sentiment index showed a three-point monthly decline in builder confidence about the market for newly built single-family homes.

“Builders are reflecting consumers’ concerns about recent negative economic trends,” says David Crowe, NAHB’s chief economist. “However, the fundamentals are in place for continued growth of the housing market. Historically low mortgage rates, steady job gains, improved household formations and significant pent up demand all point to a gradual upward trend for housing in the year ahead.” NAHB chairman Ed Brady points out that members are more optimistic about home sales “in the coming months.”