24/7 Wall St. Insights
- The carefully followed S&P Case-Shiller index, which covers housing prices each month, showed that these rose again in July.
- It shows that San Diego is the most expensive housing market in America.
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How cheap or expensive a housing market can be measured in several ways. One of the most carefully watched research reports about home prices by major metropolitan area is the S&P Case-Shiller Indexes. These reports are released monthly, and they monitor the increase in home prices in 20 cities over time.
Home prices rose 5% in July compared to the year before. In fact, increases have become a trend over the past several months. “Accounting for seasonality of home purchases, we have witnessed 14 consecutive record highs in our National Index,” says Brian D. Luke, CFA, Head of Commodities, Real & Digital Assets. Case-Shiller researchers do not comment much on why the trend is so strong. One reason is probably a low inventory level nationally due to people staying in homes with low mortgage rates because the Federal Reserve kept interest rates near historic lows to boost the economy. Some of these people have 30-year fixed mortgages with a rate of under 3%.
Case-Shiller also examined home prices in the top 20 markets over a period that began in January 2000. Each city received an index of 100 at that time. In the cities where prices have grown rapidly, the number has risen to 300 or more over the past 24 years. Meanwhile, in cities where prices rose very little in that time, the number is under 200.
San Diego has seen the fastest price rise, with an index of 446.55 this July. Nearby Los Angeles is second, with an index of 445.63. Case-Shiller gives no reason for the San Diego increase, but an explosion in the city’s population over the past several decades could have something to do with it. San Diego had 875,538 residents in 1980. Last year, according to the Census Bureau, the number was 1,388,320. Over that period, homebuilders would have to keep pace, and there is a good chance that this did not happen. It is supply and demand in action.
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