Home Prices Continued to Rise Nationally Over Last 12 Months

New York, NY, July 28, 2015—Home prices continued their rise across the country over the last 12 months, according to the S&P/Case-Shiller Home Price Indices for May 2015.

The 10-City Composite and National indices showed slightly higher year over year gains, while the 20-City Composite had marginally lower year over year gains when compared to last month. The 10-City Composite gained 4.7% year over year, while the 20-City Composite gained 4.9% year over year.

The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 4.4% annual increase in May 2015 versus a 4.3% increase in April 2015.

Before seasonal adjustment, in May the National index, 10-City Composite and 20-City Composite all posted a gain of 1.1% month-over-month. After seasonal adjustment, the National index was unchanged; the 10-City and 20-City Composites were both down 0.2% month-over-month. All 20 cities reported increases in May before seasonal adjustment; after seasonal adjustment, 10 were down, eight were up, and two were unchanged.

“As home prices continue rising, they are sending more upbeat signals than other housing market indicators,” says David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “Nationally, single family home price increases have settled into a steady 4% to 5% annual pace following the double-digit bubbly pattern of 2013. Over the next two years or so, the rate of home price increases is more likely to slow than to accelerate. Prices are increasing about twice as fast as inflation or wages. Moreover, other housing measures are less robust. Housing starts are only at about 1.2 million units annually, and only about half of total starts are single family homes. Sales of new homes are low compared to sales of existing homes.

“First time homebuyers are the weak spot in the market. First time buyers provide the demand and liquidity that supports trading up by current home owners. Without a boost in first timers, there is less housing market activity, fewer existing homes being put on the market, and more worry about inventory. Research at the Atlanta Federal Reserve Bank argues that one should not blame millennials for the absence of first time buyers. The age distribution of first time buyers has not changed much since 2000; if anything, the median age has dropped slightly. Other research at the New York Fed points to the size of mortgage down payments as a key factor. The difference between a 5% and 20% down payment, particularly for people who currently rent, has a huge impact on buyers’ willingness to buy a home. Mortgage rates are far less important to first time buyers than down payments.”