What happened: Prices rose in more than half of the largest U.S. markets, led by San Francisco and Las Vegas, reflecting once again the high cost of U.S. housing, especially in tech hotbeds. The Case-Shiller national index is now 6% above its prior year-to-year peak.
The 20-city index that skews toward the biggest metro areas is still 1.3% below its all-time high, though. Big cities generally experienced even bigger booms before 2006 and the ensuing housing bust and some have not climbed all the way back.
Big picture: The U.S. housing market is in pretty good health. Sales keep rising and builders are busy as millennials enter their home-buying years. Low interest rates and the best jobs market in years have created a tailwind that’s fueling demand.
The supply of new and previously owned homes for sale, however, has not kept pace and that’s contributed to a sharp escalation in prices. Without more supply, some buyers could get frozen out.
Another potential drag in 2018 could be higher mortgage rates. The Federal Reserve raised a key interest rate in December that helps determine the cost of borrowing. The central bank could boost rates by up to another percentage point in the next 12 months, forecasts show.
What are analysts saying?: “Home prices continue their climb supported by low inventories and increasing sales,” says David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices. “Underlying the rising prices for both new and existing homes are low interest rates, low unemployment and continuing economic growth.
Yet Blitzer also offered a cautionary note.
“Some of these favorable factors may shift in 2018. The Fed is widely expected to raise the fed funds rate three more times to reach 2% by the end of the new year. Since home prices are rising faster than wages, salaries, and inflation, some areas could see potential home buyers compelled to look at renting,” he said.
“Data published by the Urban Institute suggests that in some West coast cities with rapidly rising home prices, renting is more attractive than buying,” he added.
Market Reaction: Stocks were mixed, with the Dow Jones Industrial Average gaining early Tuesday in light trading the day after Christmas but other indexes in the red.
Author:Traci Ann Lloyd Phone: 561-424-1172 Dated: February 7th 2018 Views: 47 About Traci Ann: Respected by her colleagues for her problem solving and leadership skills, Traci brings extensive kn...
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