Today, the Federal Housing Finance Agency (FHFA) released their housing price index data for December 2015. FHFA data showed that prices were up 5.7 percent in December from one year ago, slightly slower than the 5.9 to 6.1 percent year over year growth seen in September thru November, but faster than growth rates seen in the early 2015.
Earlier this week, Case Shiller and the National Association of Realtors® (NAR) reported price data.
NAR data showed that prices grew at a 7.2 percent pace from December 2014 to December 2015. NAR also reported on new January 2016 data which showed a bump up to 8.2 percent growth from one year ago.
Case Shiller data showed that house prices rose more than 5 percent in all three indices since December 2014. The national index gained 5.4 percent, while the 10-city composite rose 5.1 percent and the 20-city composite rose 5.7 percent year over year. While the gain in the national index was higher in December vs. November, the gain in the 10-city index was lower and the rate of change in the 20-city index was the same as the previous month.
Recent housing price data at the national level suggests that home prices continue to increase at a strong pace—faster than what would be considered typical. Strong buyer demand and low inventories coupled with still relatively low levels of new construction are continuing to push prices up and keep housing market tipped in favor of sellers in most local markets.
Of course, potential buyers and sellers should be sure to put the national numbers in the context of what is going on in their local markets. The fastest overall growth rates were seen in Portland (11.1%), San Francisco (11.0%), and Denver (10.9%) in the year ending November 2015. By contrast, Chicago (2.0%), Washington DC (2.1%), and Cleveland (2.2%) were the slowest growing markets. Data shows that sellers in these somewhat weaker areas may not have as much power to demand higher prices for their homes given the local market. How does your market compare to the national price trends?
NAR reports the median price of all homes that have sold while Case Shiller and the Federal Housing Finance Agency report the results of a weighted repeat-sales index. Case Shiller uses public records data which has a reporting lag. To deal with the lag, Case Shiller data is based on a 3 month moving average, so reported December prices include information from repeat transactions closed in October, November, and December. For this reason, changes in the NAR median price tend to lead Case Shiller and may suggest that additional strong price growth could be on the horizon. The current strong pace is a reflection of continued demand from buyers in an economy where jobs are still being created and there is a low supply of homes for sale. While affordability is a concern in an environment where home price growth is outpacing income growth and mortgage rates are expected to rise, demand has generally been strong enough to shake off this concern.