While 2019 saw some slowdown in the appreciation of home prices, recent data show the market is firming, with some experts striking a bullish note going into 2020.
The S&P CoreLogic Case-Shiller U.S. National Home Price Index, which measures average home prices in major urban centers across the United States, grew by a year-over-year rate of 3.3 percent in October, according to S&P Dow Jones Indices. That rate of housing stock price growth was higher than the 3.2 percent annual rise in September.
“October’s U.S. housing data continue to be reassuring,” said Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices. “With October’s 3.3 percent increase in the national composite index, home prices are currently more than 15 percent above the pre-financial crisis peak reached July 2006.”
Besides tracking home prices nationally, the Case-Shiller index also examines pricing dynamics in 20-city and 10-city composite readouts.
The figures show that the 10-city composite year-over-year increase came in at 1.7 percent, up from 1.5 percent in the previous month. The 20-city composite posted 2.2 percent annual growth, up from 2.1 percent in the previous month. Price dynamics of the 20-city composite in October reveal the fastest rate of growth in five months as well as the third consecutive acceleration.
Some experts suggest the market may be poised for more dynamic price growth in the New Year.
“A slight re-strengthening in home price growth is not a surprise,” said Lawrence Yun, chief economist at the National Association of Realtors (NAR), in comments to Yahoo Finance. “Demand remains strong and supply is lacking.”
Cities located in southern parts of the United States noted the biggest price growth. Phoenix, Tampa, and Charlotte led the way, with annual price increases of 5.8 percent, 4.9 percent, and 4.8 percent respectively.
“Faster price appreciation in warmer, Southern states reflect the ongoing migratory trend of people moving out of expensive regions of the country to more affordable parts. Southern cities should once again do better than most other markets,” Yun told the publication.
Price changes in New York, Chicago, and San Francisco were at the lower end of the table, with October year-over-year price gains of 0.8 percent, 0.5 percent, and -0.4 percent, respectively.
A separate report from the Federal Housing Finance Agency released on Dec. 31 showed home prices grew by 5.0 percent in October year-over-year.
The housing market is regaining momentum after the Federal Reserve cut interest rates three times this year, pushing down mortgage rates from last year’s multi-year highs. Single-family building permits scaled their highest level since July 2007 in November. Confidence among homebuilders in December reached levels last seen since June 1999.
New Home Sales Pick Up
In a report on Dec. 23 (pdf), the Commerce Department said new home sales rebounded 1.3 percent to a seasonally adjusted annual rate of 719,000 units in November, lifted by gains in activity in the Northeast and West regions.
Sales jumped 16.9 percent from a year ago.
October’s sales pace was, however, revised down to 710,000 units from the previously reported 733,000 units. New home sales are volatile on a month-to-month basis because they are drawn from a small sample of houses selected from building permits.
“We expect housing activity to remain supported with now-lower mortgage rates and a Fed on hold, but do not expect a further substantial pick-up in activity into 2020,” said Veronica Clark, an economist at Citigroup in New York.
The median sales price of new houses sold in November 2019 was $330,800, while the average sales price was $388,200.
Some experts were more guarded in their growth estimates.
“Demand for housing is unlikely to sustain the pace of recent rebound in 2020, as mortgage rates appear to have bottomed out and supply remains thin,” economist Andrew Husby told Bloomberg, adding that he expects “median home price appreciation for the year ahead to be in the low single digits.”
The seasonally‐adjusted estimate of new houses for sale at the end of November was 323,000, which amounts to a 5.4-month supply at the current sales rate, the Census Bureau said.
Reuters contributed to this report.
