On Tuesday, the S&P/Case-Shiller Home Price Index for January 2015 was released, based on real estate prices of 20 metropolitan regions. TheStreet reports that it showed an increase of 4.6% in January 2015 compared to last year's figures and it is higher than December's reported 4.4% increase.
Housing Views states that from the data, one could see that home prices continued to rise for a one year period. But monthly data revealed "slowing increases and seasonal weakness."
However, according to News Max Finance, the home prices continued to rise as homebuyers face problems regarding affordability of homes and tight supply. The outlet has listed the following explanation:
Reason for High Prices
Only a small number of Americans have listed their homes available in the market for sale this January, producing a limited supply.With high demand and low supply, naturally, the prices would increase. The outlet states that housing inventories have been tight since December last year.
Limited Supply, But Home Were Sales Down
Even with limited supply, home sales were down because of high prices. Although the employment rate has been improving ---creating more jobs and increasing the purchasing power of many Americans--- and there are currently low mortgage rates in that season, the chance of producing high volume of home sales was not realized. The increase in home prices was too much, even outpacing income or earnings by a significant lead, says News Max Finance.
"Home prices are rising roughly twice as fast as wages, putting pressure on potential homebuyers and heightening the risk that any uptick in interest rates could be a major setback," said David Blitzer, chairman of the index committee for S&P Dow Jones Indices.
All the 20 metropolitan regions surveryed by S&P/Case-Shiller have showed higher home prices than last year. According to S&P Dow Jones Indices, the 20 metropolitan regions included in the study are the following: Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa and Washington, D.C.
The three cities that posted the largest increase in home prices were the following (Jan 2014-Jan 2015):
1. Denver (8.4 percent)
2. Miami ( 8.3 percent)
3. Dallas (8.1 percent)
Not all cities have posted a high increase in home prices. In Washington, DC home prices from January 2014 to January 2015 were almost unchanged, posting only a 1.3 percent rise.
Expectations
However, this is just the start of the year. House supply remains tight, with the number of homes for sale in February equating to only 4.6 months of sales, compared to an average of 5.2 months last February 2014, as mentioned by News Max Finance. The housing market still has an unhealthy number of months of supply, falling the below 6 months key indicator.
These spring months, it is possible that more data on how tight our supply is would emerge and let's hold on to our seats to anticipate the new home prices this spring season.
