October registers a monthly increase of 1.7%, as western metros continue to lead the way.
By Manuel Gutierrez, Consulting Economist to NKBA
Strong demand for housing, combined with low inventory of homes for sale, continues to result in upward pressure on house prices. The average price of homes sold in October last year was 1.7% higher than in the previous month according to the Case-Shiller home price index. House prices have been increasing at a faster rate each month since May of last year.
October’s increase puts house prices 8.4% above the year before, as shown in the figure 1 display of long-term annual increases in house prices since the late 1980s.
Last year’s rise in house prices was buoyed by the coronavirus pandemic, as well as the decision of many renters to become homeowners. Also contributing to this trend were the many current homeowners who decided either to move to a different, sometimes larger house away from large metropolitan areas, or in some cases, even to purchase a second home.
As expected, on a metropolitan area basis, home prices and price increases differ among 20 metro areas for which we have reliable house price data.
House price increases over the last year have ranged from a high of 12.7% in Phoenix, to a low of 6.0% in New York (not highlighted in Figure 2).
Other metro areas with high house price appreciation are Seattle, up 11.7%, and San Diego, where prices appreciated 11.6% over the twelve months ending in October of last year.
The three metro areas with the highest price gains were all on the West coast. When Portland, at +8.8% is included, four of the top six are from the West.
State House Price Trends
The Case-Shiller house price index only provides data at the national or metro levels, but an alternate source with state level data is an index developed by the Federal Housing Finance Agency (FHFA).
For reference, Figure 3 compares the annual changes for both the Case-Shiller and FHFA house price indexes at the national level. Although they aren’t identical, on a directional basis they follow a very similar path.
For some periods, such as 1998 through 2005, the Case-Shiller index (black line) price changes were higher than those estimated by FHFA (red line). Conversely, since 2015, Case-Shiller house prices have been rising slower than those calculated by the FHFA index.
Just like with the metros, the states with the highest house price increases are mostly on the West coast. On Map 1, Idaho, the darkest green, leads the nation with a 14.5% house price appreciation. This is followed by Arizona (+11.1%), Washington (+10.8%), Utah (+10.7%), and Montana (+10.1%).
There are a few states east of the Mississippi with relatively high home price appreciation. Tennessee is up 10%, New Hampshire 9.9%, and Ohio and Georgia each showing 9.3% gains.
On a long-term basis, when comparing today’s house prices with those of 1991, when the FHFA began collecting this data, a similar picture emerges.
Map 2 shows that eight of the top 10 states for highest long-term home appreciation are also on the West Coast. The one outstanding exception is the District of Columbia, which leads the nation overall with an annual average 17% increase in house prices since 1991. Florida is number 10, with an annual average gain of 8%.
The predominance of these states is the natural long-term tendency of the U.S. population to migrate from the Northeastern and Midwest states towards the West or the South.
Condominium Price Changes
The house price data discussed above were for single family homes sold. Case-Shiller index also provides selling prices for condominiums, restricted to only five metro areas. They are those larger metros with sufficient number of sale transactions that enable Corelogic to calculate the house price index reliably.
Figure 4 shows that condominium price appreciation is no higher than 5.2% for the five metros compared, and has actually dropped in two of those metros. All five are lower than the 8.4% average price increase for single family homes. In fact, condo prices in New York have been falling for nearly two years. Prices first turned down at the beginning of 2019.
