According to the latest S&P/Case-Shiller Home Price Indices for March 2015, U.S. home prices continued their rise across the country over the last 12 months.
"Home prices have enjoyed year-over-year gains for 35 consecutive months," says David M. Blitzer, Managing Director & Chairman of the Index Committee for S&P Dow Jones Indices. "The pattern of consistent gains is national and seen across all 20 cities covered by the S&P/Case-Shiller Home Price Indices. The longest run of gains is in Detroit at 45 months, the shortest is New York with 27 months. However, the pace has moderated in the last year; from August 2013 to February 2014, the national index gained more than 10% year-over-year, compared to 4.1%.
"Given the long stretch of strong reports, it is no surprise that people are asking if we're in a new home price bubble. The only way you can be sure of a bubble is looking back after it's over. The average 12 month rise in inflation adjusted home prices since 1975 is about 1.0% per year compared to the current 4.1% pace, arguing for a bubble. However, the annual rate of increase halved in the last year, as shown in the first chart. Home prices are currently rising more quickly than either per capita personal income (3.1%) or wages (2.2%), narrowing the pool of future home-buyers. All of this suggests that some future moderation in home prices gains is likely. Moreover, consumer debt levels seem to be manageable. I would describe this as a rebound in home prices, not bubble and not a reason to be fearful."
Both the 10-City and 20-City Composites saw year-over-year increases in March. The 10-City Composite gained 4.7% year-over-year, while the 20-City Composite gained 5.0% year-over-year. The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 4.1% annual gain in March 2015 versus a 4.2% increase in February 2015. San Francisco and Denver reported the highest year-over-year gains, with price increases of 10.3% and 10.0%, respectively, over the last 12 months.
San Francisco's 10.3% annual gain is its first double digit year-over-year increase since July 2014. Dallas reported a 9.3% year-over-year gain to round out the top three cities. Ten cities reported higher price increases in the year ended March 2015 over the year ended February 2015. Tampa led the way with a reported increase of 1.4%. Ten cities saw their prices decrease annually, led by Cleveland, down 1.2% in the year ending March 2015.
The National index increased again in March with a 0.8% increase for the month. Both the 10- and 20-City Composites increased significantly, reporting 0.8% and 0.9% month-over-month increases, respectively. Of the 19 cities reporting increases, San Francisco led all cities with an increase of 3.0%. Seattle followed next with a reported increase of 2.3%. Cleveland reported an increase of 0.4%, its first positive month-over-month increase since August 2014. New York was the only city to report a negative month-over-month change with a -0.1% decrease for March 2015.