U.S. home prices extended their steady upward march in May, spurred by rising sales and a dwindling supply of available houses.
The Standard & Poor’s CoreLogic Case-Shiller 20-city home price index increased 5.2 percent in May compared with a year ago. That is down from a 5.4 percent annual gain in April but still above last summer’s growth rate.
Solid job growth and near-record low mortgage rates are spurring more Americans to buy homes. Yet higher prices haven’t encouraged more people to list their properties for sale. That is forcing buyers to compete against each other and bid up prices, particularly in coastal cities with strong job growth.
“Sellers are in the driver’s seat, as buyers contend with fierce competition and very fast-moving markets,” Svenja Gudell, chief economist at real estate data provider Zillow, said.
Home prices are slowly edging back to their peak levels reached during the housing bubble a decade ago. After falling 35 percent from 2006 through 2012, the 20-city index is now just 8.8 percent below its peak.
Portland, Oregon, Seattle, and Denver posted the biggest year-over-year gains in May for the fourth straight month. Home prices increased 12.5 percent in Portland, 10.7 percent in Seattle and 9.5 percent in Denver.
While the 20 city-index remains below its bubble level, seven cities reached new peaks in April, including Portland, Seattle and Denver as well as Boston, Charlotte, Dallas and San Francisco.
Ralph McLaughlin, chief economist at online real estate service Trulia, points out that home price gains in San Francisco, one of the nation’s most expensive housing markets, finally appear to be slowing. They rose 6.5 percent from a year earlier, the smallest annual gain in nearly four years.
The housing market has been mostly healthy this year, adding to its steady recovery from the bust that began in 2006. Sales of existing homes rose 1.1 percent in June to the highest level in more than nine years.
Still, sales may be held back in the coming months by the lack of available homes. The number of houses for sale has fallen 5.8 percent in the past year, to 2.12 million, according to the National Association of Realtors.
That constraint could already be having an impact. The number of Americans who signed contracts to buy homes fell in May, according to the Realtors, and is below its year-ago level for the first time in nearly two years.
Builders are breaking ground on more single-family homes, which boosts construction jobs. But the increase in homebuilding hasn’t lifted the supply of homes enough to slow price gains.
Mortgage rates are near historic lows, which can offset price gains by keeping monthly payments in check. The average 30-year fixed mortgage rate rose to 3.45 percent last week, according to Freddie Mac. That’s down from 4.04 percent a year ago.
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