Courtesy of USA Today
U.S. home prices in the USA’s 20 biggest cities rose 9.3% in the 12 months ending in February. It was the biggest annual growth rate in almost seven years, a closely watched housing index out Tuesday said.
The home price increases were solid across all 20 cities measured by the Standard & Poor’s/Case-Shiller index. The 9.3% gain was up from an 8.1% year-over-year gain in January.
From January, prices rose 0.3% in February for the 20-city composite of the USA’s largest metropolitan housing markets. In eight of the 20 cities, prices dipped slightly from January but all posted increases when compared to their year-ago levels.
Price increases are being driven by increased demand, a tightening inventory of homes for sale and fewer foreclosed properties, which tend to sell at a discount to others.
“Housing continues to be one of the brighter spots in the economy,” said David Blitzer, chairman of the index committee.
But there’s increasing concern that robust price increases are not sustainable, and that what’s happening in the large metros is not broadly reflective of the national housing market.
“This report needs to start being taken with a grain of salt,” says Stan Humphries, chief economist at real estate web site Zillow. The cities measured are “overly skewed” to quickly rebounding markets – particularly in the Southwest and on the West Coast, he says.
The index returns are also being boosted by a shift in transactions away from foreclosure re-sales, which are lessening, Humphries says.
On a seasonally adjusted basis, prices rose 1.2% in February from January. At that pace, the gain exceeds the average month to month gain during the years leading up to the housing bust, says Jed Kolko, Trulia chief economist.
He says its not a bubble — yet. Big price gains from low price levels, which is what we have now, are very different than big price gains from high price levels, which is what occurred before the bust.
Year over year, Phoenix continued to stand out with a gain of 23%, followed by San Francisco at almost 19% and Las Vegas at nearly 18%, the S&P/Case-Shiller index showed. Most of the cities seeing the biggest gains also fell hardest during the crash.
Three East Coast cities — New York, Boston and Chicago — saw the smallest year-over-year price improvements.
And other housing market indicators are suggesting a slowdown in home sales and price gains.
Zillow’s first-quarter home value index was up 0.5% from the fourth quarter of last year. That compared with a 2.1% jump in the fourth quarter from the third, Zillow’s index showed, marking the smallest quarter-to-quarter gain since the home price recovery began.
A home value index produced by John Burns Real Estate Consulting shows national prices up 5.7% in the first quarter of 2013 over the first quarter of 2012.
That’s just a little slower than the 5.9% jump in the fourth quarter of 2012 over the same period a year earlier, according to the John Burns inex.
On the sales front, March’s pending home sales were up 1.5% from February for only a modest gain, the National Association of Realtors reported Monday. Those figures reflect signed contracts, not closings.
And existing home sales in March eased 0.6% from February’s level.
Both were held down by the lack of houses for sale, NAR said. The supply of existing homes for sale in March was about 17% lower than a year ago.
Tight supplies of homes for sale will likely continue to lift prices in some markets.
Nationwide, there was a 4.7-month supply of homes for sale in March, meaning they would all sell in that time frame if sales continued at March’s pace and no supply was added. Typically, a six-month supply is considered balanced.
California markets have even tighter supplies of homes for sale, dropping below 3 months in March, the California Association of Realtors says.