Home Prices Rise, Though Not as Fast as Before

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Data from two national sources confirmed that housing prices continued to rise in September, posting a solid past 12 months, although price acceleration appears to be slowing.

The S&P/Case-Shiller 20-City Home Price Index was up 0.7% in September over August, and 13.3% year-over-year. The Federal Housing Finance Agency Home Price Index, which is usually a more moderate number since it includes conventional mortgage sales only — the middle tier of housing sales — was up 0.3% from August and 8.8% year-over-year.

The rate of price appreciation slowed in 19 of 20 cities covered by the Case-Shiller index, with Miami as the outlier. The South Florida metro showed consistent price increases, up 0.8% for September and 0.8% for August.

Market observers wondering about the price deceleration need look no further than interest rates. According to FHFA, the contract rate for loans closed in October was 4.32%, up sharply from 3.55% in June. It appears that another month of interest rate increases may be in that data pipeline — a reflection of the financial markets’ anxiety about the government shutdown in October — and so it appears likely that reported home prices will continue to cool next month.

However, the data is coming off a good strong run. Nationally, home prices as measured by Case-Shiller are back to their mid-2004 levels, and now only 20% off their bubble peak of the summer of 2006. Inhabitants of many locales are feeling tighter housing price markets than that, and the data show wildfire in the West, with Los Angeles, San Diego, and San Francisco up more than 20% year-over-year. Las Vegas, leading the pack, is up a dizzying 29.1% for the 12 months.

Other cities experiencing double-digit price jumps include Atlanta (up 18.7%), Detroit (up 17.2%), Minneapolis (up 10.1%), and Tampa (up 14.5%).

Tight inventory conditions, investment purchases, and stronger, though still middling, employment appear to factors behind the longer-term price strength.

Separately, the pool of foreclosure inventory appears to be shrinking. A report from Lender Processing Services, a Jacksonville, Fla.-based mortgage analytics firm, released last week notes that foreclosure “pre-sale” inventory — the subset of the housing market usually blamed for dragging down prices for nondistressed homes — has dropped 29.6% to 1.28 million homes, the lowest level since 2008.

The states with the highest levels of non-current loans (which include both foreclosure inventory, and mortgages where the homeowners are running behind that might turn into foreclosures) are Mississipi, Florida, New Jersey, New York, and Louisiana.