According to the Case-Shiller National Home Price Index for June, Seattle, Washington continued to lead home price growth for the tenth consecutive month with a June reading of 13.40 percent growth year-over-year. Portland Oregon held second place for home price growth in the 20-City Home Price Index in June but trailed Seattle by 5.20 percent with 8.20 percent year-over-year home price growth. Dallas Texas held third place with a year-over-year home price growth rate of 7.70 percent. The 20-City Home Price Index increased by 5.70 percent year-over-year and was unchanged from May’s reading.

Case-Shiller’s National Home Price Index reported a reading of 5.80 percent home price growth in June as compared to May’s reading of 5.70 percent.

Wage Growth, Strong Economic Indicators Drive Demand for Homes

Case-Shiller’s month-to-month home price data also reflected continued growth. 14 cities reported higher home prices in June after seasonal adjustment. Home prices rose 0.40 percent month-to-month nationally; the 20-city index rose by 0.10 percent month-over-month after seasonal adjustment.

Shortages of homes for sale continue to drive up home prices as sales of pre-owned homes outpace new home sales. Builders haven’t kept up with demand due to ongoing labor and lot shortages and rising materials costs. There was an estimated 4.20 months’ supply of homes for sale in June; the average level is a six-month supply. Low mortgage rates continue to encourage first-time and current buyers to enter the market.

David M. Blitzer, Managing Director, and CEO of S&P Dow Jones Indices Committee said that although home prices are rising steadily, wage growth and overall economic growth were driving demand for homes in June. Mr. Blitzer said that current economic trends indicated home price growth was not expected to reverse anytime soon.

Case-Shiller’s National Home Price Index indicated slower home price growth in April. Year-over-year, home prices rose 5.50 percent in April as compared to 5.60 percent in March. Year-over-year readings are calculated on a seasonally-adjusted annual basis.

Case-Shiller’s 20 City Home Price Index was also lower with a seasonally-adjusted year-over-year reading of 5.70 percent gain in April as compared to the year-over-year March reading of 5.90 percent. Seattle, Washington held on to its lead for home price growth with a year-over-year reading of 12.90 percent; Portland Oregon followed with a year-over-year reading of 9.30 percent, and Dallas, Texas maintained third place in the 20-City Home Price Index with a year-over-year reading of 8.40 percent.

Month–to–Month Home Prices Rise in 19 of 20 Cities

Seattle also led in home price growth with a rate of 2.60 percent from March to April. Portland followed with home price growth of 1.60 percent, and Denver, Colorado reported month-to-month home price growth of 1.30 percent, which edged Dallas Texas out of third place in month-to-month home price growth rates.

Analysts have been watching housing markets carefully due to a prolonged shortage of homes for sale against high demand for homes in many areas. David M. Blitzer, Chair and Managing Director of the S&P Indices Committee, noted that skyrocketing growth in home prices must slow and eventually decline. During a press conference, he asked,” Will home price gains gently slow, or will they crash and take the rest of the economy with them?”

Analysts questioned how long home prices can continue to grow and remain sustainable. Affordability is a significant aspect of home price growth as first-time and moderate-income home buyers provide opportunities for present homeowners to sell and move up to larger homes. Mr. Blitzer eased fears of an imminent housing market crash and said, “For the moment, conditions appear favorable for avoiding a crash.”

Mr. Blitzer said that more housing starts and an expected increase in home buyers were positive signs for sustaining current home prices. Upcoming readings on consumer confidence and sentiment, new home sales and mortgage rates will support estimates of when and how much home prices will continue to increase.