Home Prices Rise Most in San Francisco, Denver and Portland

In all 20 U.S. cities included in the S&P/Case-Shiller home price index, October house prices increased year over year, and 12 of the 20 posted a month-over-month increase. Chicago (down 0.7%), Cleveland (down 0.4%) and San Diego and Washington, D.C. (both down 0.3%) posted the largest price declines compared with September. The cities posting the largest year-over-year gains were San Francisco, Denver and Portland, all posting a 10.9% increase in home prices.

The other four cities posting month-over-month price declines were Atlanta (0.2%), Detroit (0.2%), Minneapolis (0.1%) and New York (0.1%). Prices were unchanged in Boston and Las Vegas

The smallest year-over-year gains came in Chicago (1.3%), Washington, D.C. (1.7%) and Cleveland (2.2%). Month over month, Miami and Tampa posted 0.7% gains, San Francisco posted a 0.6% gain, while Phoenix, Portland and Seattle each saw a rise of 0.5%.

The S&P/Case-Shiller home price index for October increased by 5.5% year over year for the 20-city composite index and by 5.1% for the 10-city composite index. The national index rose 5.2% year over year, up from an increase of 4.9% in September. The consensus estimate for the 20-city index called for growth of 5.4% year over year.

Month over month, the 20-city index rose 0.1%, as did both the national index. The 10-city index was flat month over month. On a seasonally adjusted basis, the 10-city and 20-city indexes rose 0.8% from September to October. All 20 cities reported increases in July, after seasonal adjustment.
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The index tracks prices on a three-month rolling average. October represents the three-month average of August, September and October prices.

Average home prices for October remain comparable to their levels in the winter of 2007.

The chairman of the S&P index committee said:

Generally good economic conditions continue to support gains in home prices. Among the positive factors are consumers’ expectations of low inflation and further economic growth as well as recent increases in residential construction including single family housing starts. Inventories of existing homes have averaged around a five month supply for the past year, a level that suggests a fairly tight market with limited supplies. Sales of new single family homes, despite recent increases in construction, remain mixed to soft compared to the trend in existing home sales.

The recent action by the Federal Reserve raising the Fed funds target rate by 25bp and spreading expectations of further increases during 2016 are leading some to wonder if mortgage interest rate might rise. Typically, increases in short term interest rates lead to smaller increases in long term interest rates. … From May 2004 to July 2007, the Fed funds rate moved up from 1.0% to 5.25%; over the same period, the mortgage rate rose from about 6% to 6.75% during a sustained tightening effort by the Federal Reserve.

Compared with their peak in the summer of 2006, home prices on both 10-city and 20-city indexes remain down about 11% to 13%. Since the low of March 2012, home prices are up 34.9% and 36.4% on the 10-city and 20-city indexes, respectively.