Morning Briefing: Home prices continue higher, sales surge

by Steve Randall24 Feb 2016
Home prices continue higher, sales surge
Two measures of US home prices have been released this week, one for December 2015 and one for January. While both show gains, they reveal differing views of the pace of increases.

The S&P/Case-Shiller HPI reveals home prices were up by 5.4 per cent in the 12 months to December 2015 compared to a 5.2 per cent rate in November. Portland (11.4 per cent), San Francisco (10.4) and Denver (10.2) had the largest year-over-year gains in the 20-city index.

“While home prices continue to rise, the pace is slowing a bit,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Seasonally adjusted, Miami had lower prices this month than last and 10 other cities saw smaller increases than last month. Year-over-year, seven cities saw the rate of price increases wane.”

Meanwhile, data from the National Association of Realtors shows the fastest pace of price increases since April 2015. January’s median sales price for existing homes was $213,800, up 8.2 per cent from a year earlier. Sales were also higher, up 11 per cent year-over-year to a seasonally-adjusted annual rate of 5.47 million.

Lawrence Yun, NAR chief economist commented: "The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints," he said. "Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession."
 
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In North America, Canada dominates with Toronto and Ottawa joining Vancouver in the top 20 while the highest-placed city in the US is San Francisco at number 28, followed by Boston (34), Honolulu (35), Chicago (43), and New York City (44).
 
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There may be no growth at all in the commercial real estate sector according to analysts at Morgan Stanley. The zero per cent growth estimate is down from a previous expectation of 5 per cent and the higher cost of commercial borrowing is a major factor in the downgrade. The low cost of some borrowing is being squeezed by softened performance of mortgage-backed bonds and with interest rates also increasing the commercial sector may seem less attractive to investors.

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