U.S. Home Price Growth Strengthened in October
Home price growth gained strength in October, according to a report released Tuesday, even as more recent indicators suggest the pace of home sales has dramatically lost momentum as the year draws to a close.
The S&P/Case-Shiller Home Price Index covering the entire nation rose 5.2% in the 12 months ended in October, stronger than a 4.9% increase in September and among the largest increases all year.
The 10-city index gained 5.1% from a year earlier, compared with a 4.9% increase in September. The 20-city index gained 5.5% year-over-year compared with 5.4% a month earlier.
Economists surveyed by The Wall Street Journal expected a 6% increase in the 20-city index.
“Generally good economic conditions continue to support gains in home prices,” said David Blitzer, managing director at S&P Dow Jones Indices. Mr. Blitzer pointed to consumers’ expectations of low inflation and further economic growth, as well as recent increases in construction of new single-family homes and apartments as tailwinds for the housing market.
After years of volatility, home price growth appears to have stabilized at an annual rate of around 4% to 5%. But while price growth has remained fairly steady throughout the year, the pace of sales has continued to ricochet, in part because high prices have started to scare some buyers out of the market.
The hottest markets in the country, primarily on the West Coast, continued to show double-digit price gains, with San Francisco, Denver and Portland, Ore., all reporting 10.9% year-over-year gains. Twelve cities saw bigger year-over-year price increases in October than in September.
Month-over-month price gains were fairly strong. Not seasonally adjusted, the U.S. Index rose 0.1% from September to October. The 10-city index was unchanged and the 20-city index gained 0.1% month-over-month in October.
After seasonal adjustment the national index was up 0.9%. The 10-city and 20-city composite were up 0.8% over the month.
Case-Shiller offers one of the clearest indicators of how home prices are faring, but also provides a delayed picture. Other recent indicators show that the pace of home sales slowed considerably in October and November, which many economists blamed on rising prices.
Sales of existing homes plunged 10.5% in November to a seasonally adjusted annual rate of 4.76 million, the National Association of Realtors said last week—the sharpest decline since July 2010. The Realtors blamed the dramatic drop on a temporary hit from new federal rules from the Consumer Financial Protection Bureau that may have led to delays in some closings, although sales were also weak in October before the rules likely had an impact.