Standard & Poor’s reported that U.S. home prices were more than 12 percent higher than a year ago, the fastest annual rate since mid-2006, as the Case-Shiller 20-City Home Price Index jumped 2.5 percent in April, or 1.7 percent after seasonal adjustments.
Home price gains have been particularly strong in former housing bubble hotspots such as California. What makes the recent data quite remarkable is that recent monthly price gains are larger than anything seen during the mid-2000s housing bubble, though the recent surge no doubt has a bit of panic buying built into it due to rising interest rates.
Granted, home prices are still well below the peak seen in 2006 – more than 25 percent lower for the 20-city index – but it won’t take long for recent price gains to close that gap. In April, home prices jumped 4.9 percent in San Francisco, 3.8 percent in Atlanta, 3.7 percent in San Diego, and 3.4 percent in Los Angeles while four cities now sport year-over-year price gains of more than 20 percent.
David M. Blitzer, Chairman of the Index Committee, had the following comments:
Last week’s comments from the Fed and the resulting sharp increase in Treasury yields sparked fears that rising mortgage rates will damage the housing rebound. Home buyers have survived rising mortgage rates in the past, often by shifting from fixed rate to adjustable rate loans. In the housing boom, bust and recovery, banks’ credit quality standards were more important than the level of mortgage rates. The most recent Fed Senior Loan Officer Opinion Survey shows that some banks are easing credit restrictions. Given this, the recovery should continue.
Source: Iacono Research
