Steel Markets

U.S. Home Prices Continue to Grow

March 25, 2016

Home prices continued to rise in January, according to the S&P/Case-Shiller Home Price Indices. The 20-City Composite gained 5.4 percent in January, up slightly from a 5.3 percent increase in December. The 10-City Composite year over year over year gain was 5.1 percent.

“Home prices continue to climb at more than twice the rate of inflation,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The low inventory of homes for sale — currently about a five month supply – means that would-be sellers seeking to trade-up are having a hard time finding a new, larger home.

“While low inventories and short supply are boosting prices, financing continues to be a concern for some potential purchasers, particularly young adults and first time home buyers,” said Blitzer. “The issue is availability of credit for people with substantial student or credit card debt. While rising home prices are certainly a factor deterring home purchases, individual financial positions are more important than local housing market conditions. One hopeful sign is that the home ownership rate, at 63.7% in the 2015 fourth quarter, may be turning around. It is up slightly from 63.5% in the 2015 second quarter but far below the 2004 high of 69.1%.”

New home construction and sales have lagged behind existing home growth but there are signs it may be changing. February starts of single family homes were the highest since 2007 and accounted for a 70 percent share of the total housing starts for the month. Before the housing crisis single family construction starts were in the 75-80 percent range.