House prices rose more steeply in May than in any month since March 2006, according to S&P/Case-Shiller Home Price Indices, released by S&P Dow Jones Indices today.
Data showed that US house prices rose by 2.5% for the 10-City Composites and 2.4% for the 20-City Composites, both for May versus April 2013.
The greatest rises in house prices were recorded in Denver and Dallas, with both surpassing their pre-financial crisis peaks (August 2006 and June 2007 respectively).
Property market experts are encouraged, because this is the first time any U.S. city has achieved a new one-month all-time high.
According to the authors of the report:
“The 10- and 20-City Composites annual returns rose slightly from April to May as they posted the best year-over-year gains since March 2006. All 20cities increased from May 2012 to May 2013 and from April 2013 to May 2013.”
In May this year, the 10- and 20-City Composites reached annual increases of 11.8% and 12.2% respectively.
Five cities posted monthly house price increases of over 3%
David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, said:
“Home prices continue to strengthen. Two cities set new highs, surpassing their pre-crisis levels and five cities – Atlanta, Chicago, San Diego, San Francisco and Seattle – posted monthly gains of over three percent, also a first time event.
The Southwest and the West saw the strongest year-over-year gains as San Francisco home prices rose 24.5% followed by Las Vegas (+23.3%) and Phoenix (+20.6%). New York (+3.3%), Cleveland (+3.4%) and Washington DC (+6.5%) were the weakest. Monthly numbers before seasonal adjustment showed all 20 cities experienced rising prices. San Francisco (+4.3%), Chicago (+3.7%) and Atlanta (+3.4%) were the leaders. However, two cities – Cleveland and Minneapolis were down slightly after seasonal adjustment.
The overall report points to some shifts among various markets: Washington DC is no longer the standout leader and the eastern Sunbelt cities, Miami and Tampa, are lagging behind their western counterparts.”
When house prices rise, owners can borrow more, so spending rises. It also boosts the construction industry.
Demand for residential property has been rising because of historically low borrowing costs, an improving job market, and short supply.
Household finances are improving thanks to the increase in value of most people’s largest asset – their home. Economists say this may stimulate consumer spending, the main driver of the American economy.
In an interview with Bloomberg, Anika Khan, senior economist at Wells Fargo Securities LLC, Charlotte, N.C., said “We continue to look forward to upward momentum. We still have historically low inventory levels.”
US house prices back to their spring 2004 levels
In May this year, house prices in the USA were back to their spring 2004 levels. “Measured from their June/July 2006 peaks, the peak-to-current decline for both Composites is approximately 24-25%. The recovery from the March 2012 lows is 15.9% and 16.5% for the 10-City and 20-City Composites.”
House prices in all 20 cites rose in May 2013. Ten of them – Tampa, Seattle, Portland, Phoenix, New York, Miami, Las Vegas, Detroit, Denver and Chicago – increased by more than 3.7%.
Miami had its largest monthly gain since August 2005, and Seattle since April 1990.
Annually, house prices rose between 3.3% and 24.5%
All the 20 cities saw annual house price increases, ranging from 3.3% to 24.5%. Twelve metropolitan statistical areas (MSAs) – Tampa, Seattle, San Francisco, San Diego, Portland, Phoenix, Minneapolis, Miami, Los Angeles, Las Vegas, Detroit and Atlanta – had increases of at least 10%.
In the following cities, house prices rose by at least 20%:
- San Francisco
- Las Vegas
Annual house prices up to May 2013 fell by 3-percentage-pounts in Detroit.