Housing price data for November, fresh out of the oven, shows dazzling year-over-year gains but a slowing in month-to-month prices. The S&P/Case-Shiller Housing Price Index that’s a composite of 20 metro areas jumped 13.7% year-over-year, beating even the past two month’s 13.3% and 13.6%. The continued march upward will certainly hearten housing bulls, as prices are currently only 20% off their bubble peaks of Spring/Summer 2006. Separately, last week the National Association of Realtors reported that volume was good, with 5.09 million homes sold in all of 2013. In addition to crossing the psychological barrier of the 5 million mark, that’s a 9.1% jump from the year before.
Monthly price figures, however, softened 0.1% from October to November. That’s typical of housing, which is a seasonal market — buyers tend to bid high when the weather is better — but it’s also the first decrease in a year, which should encourage housing bears. Dr. Stan Humphries, the chief economist of real estate listing website Zillow, noted that “individual markets are showing signs of slowing down, which is helping to set up a mixed bag this year for buyers and sellers.”
Overall, the fact that these data reflect somewhat higher interest rates — 30-year mortgage rates began to break through the 4.25% level in October — shows that housing is generally in recovery. Even if mortgage rates continue to rise (which is likely with the Federal Reserve tapering its purchases of bonds), buyers will probably continue to stay in the market the rest of this year. (The NAR’s forecast is for volume to stay level even as mortgage rates rise to 5.4% by year’s end, with prices jumping 6%).
Every city in the composite 20 showed year-over-year gains, led by Las Vegas (up 27.3%) and San Francisco (up 23.2%). Thirteen cities posted double-digit jumps, a widespread pattern of strength that included Chicago (up 11%); Detroit (up 17.3%), and Tampa (up 15.7%). Some relative laggards like Boston (up 9.8% year-over-year) and Cleveland (up 6.0% year-over-year) registered monthly increases (0.2% and 0.3%, respectively).
Of course rising prices are no news to homebuyers, who have also been faced with thin inventory in many cities around the country. What looks likely is that this spring brings some relief from the latter problem but not the former. In other words, shoppers may have more properties to choose from in the spring — which is traditionally the case — but they might not get any cheaper.
To take a medium-length view based on the data, if you examine a chart of pricing data for the past five years, it looks like a “W” shape with five troughs instead of two. What the past couple months’ reports tell us is that those who are in the market to buy, and who are counting on a sixth dip, may find themselves on the sidelines for a rather long time.