Since this is near the end of the prime residential real estate season I thought it would be a good time to look at some market indicators.
Case-Shiller Home Price Indices:
David M. Blitzer the Chairman of the Index Committee at S&P Dow Jones Indices says that “Home prices continue to strengthen.” Two cities set new highs, Dallas and Denver surpassing their pre-crisis levels and five cities- Atlanta, Chicago, San Diego, San Francisco and Seattle – posted monthly gains over three percent, also a first time event.
“The Southwest and the West saw the strongest year-over-year gains. San Francisco home prices rose 24.5% followed by Las Vegas 23.3% and Phoenix 20.6.” The Midwest and East did see increases but they were more modest, Cleveland (+3.4), New York (+3.3%) & Chicago (+3.7%). There were two cities that did see small declines.
CPI (Consumer Price Index)
Did you know that the CPI has a component of housing values? It’s called the Shelter Index. It has been part of the CPI since its inception, but in 1978 major changes were made. The Shelter Index has a weight or importance of 32.776 percent. When the sampling is taken for the index, both renters and homeowners are included. Homeowners make up around 66% of the sample in urban areas.
The CPI for June 2013 saw an increase of 0.5 percent (seasonally adjusted). In the last 12 months (June 2012-June 2013) there has been a 1.8 percent increase in the CPI that is before seasonal adjustment.
The Shelter Index rose 2.3 percent. This increase is considered to be a major factor in the rise of the over all index.
New and Existing Home Sales
US Census Bureau
According to the US Census Bureau and US Dept. of Housing and Urban Development sales of new and existing single-family homes is up 8.3 percent from May 2013 and up 38.1 percent over last year at this time. Looking at the chart above you can see where June 2013 had a total of 497,000 units sold and June of 2012 had only 360,000 units sold.
You can also see that inventory of homes for sale (“Months’ Supply” on the chart) is at 3.9 months which is very low. A health supply would be closer to 6 months, and anything over 6 months is concerning. Look at 2008 with its 11.2 months supply.
The median sales price for homes in June 2013 is a seasonally adjusted price of $249,700; the average sales price was $295,000.
US Census Bureau
According to the US Census Bureau, national vacancy rates in the second quarter of 2013 were 8.2 percent for rental housing and 1.9 percent for homeowner housing. These lower vacancy rates are one of the driving forces contributing to price increases in both rentals and existing home sales. If you look at the rates historically over the last eight years (see chart above) there is a substantial difference. We could also surmise that this means there has been a growth in household formation.
The odd thing is that we have seen a decrease in the homeownership rate. It moved from 65.5 percent in the second Q of 2012 to 65.0 percent in the second Q of 2013.
The data looks strong no denying that, however the lower homeownership rate begs the question – is it because people don’t want to buy and they would prefer to rent OR is it because it has become very difficult (in some markets) for the first time home buyer to purchase a home. Time will tell and I’ll keep my eye on it for you.
It’s not too late to join my August Class – watch the recording of Session one and join me tomorrow for Session two.
Diana D. Hill