Photographer: Mike Kane/Bloomberg

Lean Inventory Fueling Home-Price Gains in 20 U.S. Cities

Steady price gains in 20 U.S. cities in May indicate that a tight supply of properties paired with increased demand is boosting home values, according to figures from S&P CoreLogic Case-Shiller on Tuesday.

Highlights of Home Prices (May)

  • 20-city property values index increased 5.7% y/y (est. 5.8%)
  • National price gauge advanced 5.6% y/y
  • Seasonally adjusted 20-city index rose 0.1% m/m (est. 0.3%)

Key Takeaways

An shortage of listings is still behind the rapid appreciation of home prices, particularly in high-demand areas such as Portland, Oregon, and Seattle, where values have surpassed pre-recession peaks. Housing demand is supported by a solid labor market, steadily rising wages and low mortgage rates. While lofty asking prices are making it difficult for some Americans to become homeowners for the first time, they’re encouraging owners of more expensive properties to put their houses up for sale, as trade-up demand remains solid.

Economist Views

“Home prices continue to climb and outpace both inflation and wages,” David Blitzer, chairman of the S&P index committee, said in a statement. “The small supply of homes for sale, at only about four months’ worth, is one cause of rising prices. New home construction, higher than during the recession but still low, is another factor in rising prices.”

Other Details

  • All cities in the index showed year-over-year gains, led by a 13.3 percent advance in Seattle, an 8.9 percent increase in Portland and a 7.9 percent gain in Denver
  • After seasonal adjustment, Seattle had the biggest month-over-month increase, at 0.9 percent, while New York posted a 0.6 percent decline
  • Home prices fell in six cities in May from the prior month
  • Separate report from FHFA showed its home-price index climbed 0.4 percent in May after a revised 0.6 percent gain a month earlier
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