Home prices increased by an average of 3.5% in November, gaining on the 3.2% rise seen in October according to the S&P CoreLogic Case-Shiller National Home Price Index. The cities which saw the highest gains were Phoenix, Charlotte, and Tampa.
- The 10-city composite rose 2.0% annually, up from 1.7%.
- The 20-city composite rose 2.6% annually, up from 2.2%.
- Home prices are now 15% above the peak seen before the 2008 collapse of the housing market.
After winding down for much of the last 12 months, home prices are seeing increased gains. Phoenix prices rose the most, gaining 5.9% year-over-year in November. Charlotte saw 5.2% gains while the cost of Tampa homes rose 5.0%. Out of the 20-city composite, 15 cities reported larger price increases year-on-year.
The gains are possibly due in part to lower mortgage rates aimed at increasing purchasing power for prospective buyers. With a sudden increase in affordability, home prices have increased accordingly as the market adjusted itself. Borrowing costs were lowered throughout the last year as the Federal Reserve implemented three rate cuts, the first in a decade, to offset recessionary pressure and help stimulate the struggling housing market. Mortgage prices hit a multi-year peak in 2019 before winding back down.
However, as well as lower borrowing costs, the market is faced with a major shortage of land and property which the National Association of Realtor’s chairman has referred to as “dire”. Inventories are near record lows, with cheaper homes being in particularly short supply. Home prices have now risen well above the highs seen before the global recession of 2008, precipitated in part by the collapse of the US housing market.
home prices are excepted to appreciate at a rate of around 5.4% over the course of 2020 pic.twitter.com/NCxM00gGQh
— Justin Savage (@savagedobetter) January 28, 2020
Craig J. Lazzara, managing director and global head of Index Investment Strategy at S&P Dow Jones Indices, commented on the overall trend in US home prices.
“With the month’s 3.5% increase in the national composite index, home prices are currently 59% above the trough reached in February 2012, and 15% above their pre-financial crisis peak. November’s results were broad-based, with gains in every city in our 20-city composite. It is, of course, still too soon to say whether this marks an end to the deceleration or is merely a pause in the longer-term trend.”
Gold prices have seen little reaction to the news. Spot gold last traded at $1,568.54/oz, down 0.52% with a high of $1,583.36/oz and a low of $1,568.27/oz. Prices have pulled back from earlier in today’s session due to a recovering US stock market which has rebounded after seeing the worst sell-off in four months. The sell-off was partly triggered by concerns surrounding the potential impact of the Chinese coronavirus on the global economy.