Home Prices Continue to Rise

The most recent data out from the S&P CoreLogic Case-Shiller Home Price Indices revealed that home prices continued to rise in November.

Year over year, the 20-city NSA index ticked up by 5.3%, and the 10-city NSA index rose by 4.5%. Both indexes saw growth of 0.2% from the previous month. The 20-city SA index rose by 0.9% month of month, which was the largest monthly gain since March 2015.

These findings are slightly lower than the home price growth seen in the Federal Housing Finance Agency (FHFA) house-price index last week. That report showed home prices rose by 0.5% in November, putting them at 6.1% year over year.

Click here to get today’s latest mortgage rates (Feb. 2, 2017).

Both reports are the first of their kind with data from the post-election economy, showing that at least through November home prices haven’t been affected too much.

At the turn of the new year, many economists predicted that home prices would continue to rise in 2017, albeit at a slightly slower pace than 2016.

Home inventory is down

Economics tells us that when demand increases and supply decreases, prices rise.

That’s exactly what’s happening in the U.S. economy right now: a lack of available homes to buy and a flood of homebuyers are driving up prices.

As Jonathan Smoke, chief economist for realtor.com recently noted, “More than two-thirds of the markets are seeing less inventory now compared to a year ago.”

A slowdown in new construction is one of the culprits; with less homes being built, inventory takes a hit, putting even more pressure on existing home sales to satisfy demand.

And as we saw in last week’s Existing Home Sales report from the National Association of Realtors, sales of previously owned homes fell by 2.8% from November to December, reflecting a tightening of inventory in that market as well. With supply down, prices have been inching up. According to data from the NAR, home prices rose by 4.0% year over year from December.

Where home prices might be later in the year

If we’ve learned anything from the first couple weeks of the Trump Presidency, it’s that the markets aren’t quite sure how to react. Volatility is the name of the game so far, making it extremely difficult to predict where any aspect of the economy will be in a few months, let alone at the end of the year.

What we can say, however, is that most experts are calling for home prices to increase by 2-3% come 2018. That’s good news for existing home owners, and potentially bad news for potential first time homebuyers looking to break onto the scene in 2017.

Click here to get today’s latest mortgage rates (Feb. 2, 2017).

from Total Mortgage Underwritings Blog http://ift.tt/2kZwpXl