Home prices appreciated 4.4 percent on average across the country. This increase reflects a genuine price growth for a typical home as it reflects a constant quality repeat-price measurement. Such a gain would translate into about $900 billion in wealth gain for property owners in the past 12 months.
Specifically, in the 12 months prior to the July figures, the FHFA home price index rose 4.4 percent. Though an increase, this latest gain is softer. The increases had been 7 to 8 percent in recent prior months. But moderating price growth should be viewed as a welcoming trend for longer-term sustainable health since wages and incomes have not gained much.
This repeat price index provides a better measure of true home price appreciation then the median price. That’s because if only larger expensive homes get sold then the median price will get a boost, though not necessarily due to price appreciation of homes. But the repeat price index computes appreciation by examining the same property after it gets transacted twice and examining the price change over that time. And FHFA, a government agency, does that by reviewing Fannie- and Freddie-backed mortgages along with their corresponding home values.
From the low point in 2010, the repeat price index has recovered 18 percent. It is now off by only 6 percent from the past peak.
All regions of the country are experiencing price gains. But the New England states are recovering at the slowest pace. Home prices in the West South Central region (Arkansas, Louisiana, Oklahoma, and Texas) are doing the best and have been setting new highs with each passing month.
An influx of new people to a city can greatly boost home values. Austin, TX has consistently seen more people come to the city over the past 25 years, though not sure if they are all of the “weird” type the city prides itself in welcoming. Due to the influx, Austin did not even experience a price drop during the Great Recession and prices have steadily marched upwards.
Home prices in Geneva spiked during the times of European religious wars as the followers of John Calvin flocked to the city. A sudden housing shortage led to multiple bidding. Though no data are present, it is likely that home prices in Baghdad spiked during years when the city’s House of Wisdom was the top learning center of the world and drew many scholars. Algebra, astronomy, and the very erotic stories of 1001 Arabian Nights were the outcomes of that age. The ancient Greek plays were preserved in Baghdad when books were getting burned in Europe. How times have changed.
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.