Home Prices Are Unstoppable, Will They Stay That Way?

MADISON, Wis. - Dec. 8, 2017 - PRLog -- RISMedia, by Suzanne De Vita
Home prices grew in the latest S&P CoreLogic/Case-Shiller Indices, up 6.1 percent year-over-year in August, compared to 5.9 percent in July. The increase is against-grain in an economy gaining at a lesser pace, says S&P Dow Jones Indices Chairman of the Index Committee and Managing Director David M. Blitzer.

"Home price increases appear to be unstoppable," Blitzer says. "Most prices across the rest of the economy are barely moving compared to housing. Over the last year the consumer price index rose 2.2 percent, driven largely by energy costs. Aside from oil, the only other major item with price gains close to housing was hospital services, which were up 4.6 percent. Wages climbed 3.6 percent in the year to August."

Is there an end in sight? According to Blitzer, home prices have come back since the downturn—and then some—but how long they sustain their trajectory remains to be seen.

"The ongoing rise in home prices poses questions of why prices are climbing and whether they will continue to outpace most of the economy," says Blitzer. "Currently, low mortgage rates, combined with an improving economy, are supporting home prices. Low interest rates raise the value of both real and financial long-lived assets.

"The price gains are not simply a rebound from the financial crisis," Blitzer says. "Nationally and in nine of the 20 cities in the report, home prices have reached new all-time highs; however, home prices will not rise forever. Measures of affordability are beginning to slide, indicating that the pool of buyers is shrinking. The Federal Reserve is pushing short-term interest rates upward and mortgage rates are likely to follow over time, removing a key factor supporting rising home prices."

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