Home sales prices rose 5.4% in January, continuing at a moderate and steady pace despite ongoing inventory shortages, a report released Tuesday said. Home prices are rising twice as fast as both inflation and wages.
January’s 5.4% year-over-year increase was slightly up from December 2015′s (downwardly revised) 5.3% pace of home price appreciation, according to the S&P/Case-Shiller U.S. National Home Price Index, which tracks repeat sales for homes in all nine Census divisions. Homes in America’s largest 20 metro areas appreciated at a slightly faster pace, welcoming 5.7% annual sales price growth in January, while prices in a select 10-city index rose an annual 5.1%. Again, both indices were slightly up from the annual gains in December.
“Home prices continue to climb at more than twice the rate of inflation,” said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices.“The low inventory of homes for sale–currently about a five month supply–means that would-be sellers seeking to trade-up are having a hard time finding a new, larger home.”
Price appreciation, which reached breakneck double-digit increases during housing’s recovery, moderated to around an annual 4-5% nationally by late 2015. But across the country and in all the cities that Case-Schiller tracks–except for Chicago (2.1%) and Washington, D.C.(2.2%)–home prices are still rising far faster than the core 2.3% rate of inflation (all items less food and energy). They’re also growing at a faster rate than wages, which have been stuck at about 2.25% annual growth for the past two years.
A shortage of housing for sale continues to push up prices, particularly at the lower end of the market. Last week Trulia released a report showing that the inventory of starter and trade-up homes is down more than 40% since 2012, making it difficult for would-be buyers to get into the market. Starter home inventory is down most in the West and South, with affordability particularly bad in California, according Trulia.
Underscoring the points of Trulia’s report, Tuesday’s S&P/Case-Shiller data reports high year-over-year price gains in Portland (11.8%), Seattle (10.7%), San Francisco (10.5%), and Denver (10.2%). Eleven of the cities recorded greater annual price increases in January than December. After Denver, the next highest annual gain was in Dallas (9.2%), followed by Tampa (7.4%), and Los Angeles (6.9%). Phoenix’s annual gain dipped to 6.1%, ending a year-long streak of increasing annual gains each month. Price gains were weakest in the Northeast region of the country; Boston had an annual 3.6% gain, New York 2.8%.