Home prices have continued to increase in key cities across the United States over the last 12 months with a rise of 5.1% in July, up from 5% the previous month.
Portland, Seattle, and Denver recorded the highest year on year gains in the S&P Corelogic Case-Shiller 20 city composite. Prices were up 12.4% in Portland, 11.2% in Seattle and 9.3% in Denver.
The 10 city composite index recorded a 0.5% month on month increase while the 20 city composite posted a 0.6% increase in July.
After seasonal adjustment, 12 cities saw prices rise, two cities were unchanged, and six cities experienced negative monthly prices changes.
‘Both the housing sector and the economy continue to expand with home prices continuing to rise at about a 5% annual rate,’ said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.
‘The statement issued last week by the Fed after its policy meeting confirms the central bank’s view that the economy will see further gains. Most analysts now expect the Fed to raise interest rates in December. After such Fed action, mortgage rates would still be at historically low levels and would not be a major negative for house prices,’ he explained.
He pointed out that the S&P CoreLogic Case-Shiller National Index is within 0.6% of the record high set in July 2006 with seven of the 20 cities setting new record highs, while the 10 year, 20 year, and National indices have been rising at about 5% per year over the last 24 months and eight of the cities are seeing prices up 6% or more in the last year.
‘Given that the overall inflation is a bit below 2%, the pace is probably not sustainable over the long term. The run-up to the financial crisis was marked with both rising home prices and rapid growth in mortgage debt. Currently, outstanding mortgage debt on one to four family homes is 12.6% below the peak seen in the first quarter of 2008 and up less than 2% in the last four quarters. There is no reason to fear that another massive collapse is around the corner,’ Blitzer added.
