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Case Shiller Home Price Indices reported new record gains for home prices in June. The National Home Price Index rose by a seasonally-adjusted annual pace of 18.60 percent as compared to May’s home price increase rate of 16.80 percent.
Home prices were 41 percent higher than they were during the 2006 housing boom; home price growth was driven by high demand for homes coupled with short supplies of homes for sale.
Case-Shiller 20-City Home Price Index posted a two percent gain in June as compared to May. Home prices rose by 19.10 percent on a seasonally adjusted annual basis in June; all 20 cities included in the index reported higher home prices. Phoenix, Arizona held first place for home price growth in June with a year-over-year price gain of 29.30 percent.
San Diego, California held second place in the 20-City Home Price Index with a year-over-year price gain of 27.10 percent and Seattle Washington followed with year-over-year home price growth of 25.00 percent.
All 20 cities posted higher home price gains in June than in May. Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, said: “In June all 20 cities gained more in the 12 months ended in June than they did in the 12 months ended in May.”
Rapidly rising home prices sidelined would-be homebuyers who expressed concerns over the fast pace of home sales, and limited choices of available homes. Cash buyers and bidding wars continued to challenge mortgage-dependent homebuyers, but low mortgage rates continued to draw homebuyers into the market.
Covid fueled an exodus from congested urban areas to less populated areas inland. Families who modified their lifestyles to include working from home and homeschooling their children needed larger homes. As workers switched from commuting to work to telecommuting, they were no longer constrained by physical proximity to their employers, but now that businesses and workplaces are reopening, it’s unknown how or if pre-covid housing and work trends will be re-established or if covid era home-based work and schooling options will expand.
In related news, the Federal Housing Finance Agency released data on sales of single-family homes owned or mortgaged by Fannie Mae and Freddie Mac. Home prices rose 17.4 percent from the second quarter of 2020 to the second quarter of 2021.
FHFA reported that home prices rose 4.90 percent from the first quarter of 2021 through the second quarter of 2021, and were 1.60 percent higher for June 2021 than in May.
Today, mortgage rates are near historic lows, with rates having actually dipped to their lowest-ever level several times over the past year.
With mortgage interest rates as low as they are now (2.87% for a 30-year fixed mortgage as of the time of this writing in September 2021), competition for housing is high. This is even more true because of the current tight inventory situation. Inventory is short all across the country and is especially tight in certain parts, including the Northwest.
Bidding wars are on the rise once again, which will have a direct impact on price increases throughout the remainder of 2021.
Right now, the average home price in the US is $298,933. According to Zillow, that’s a 16.7% increase from the same time last year. According to Zillow, the housing market across the country is still “very hot” right now.
Mortgage rates have dipped over the past few months and are expected to remain extremely low, which may help boost sales over the coming months. Experts anticipate the 30-year fixed-rate mortgage rate to remain around 3% throughout the remainder of the year.
It should be noted, however, that the Case-Shiller Index has some shortcomings. For instance, the index is based on changes in home prices ofa single home through successive sales. This means that to calculate its home price index, the Case-Shiller searches for sales of the same home over a period of time and calculates the difference in contract price.
This methodology can distort the home price tracker downward during times of weak economy because there is no distinction made for homessold in foreclosure or as a short sale.
Another distortion in the Case-Shiller Index is that the model neglects all home types that are not of type “single-family residence.” This means that multi-unit homes and condominiums are excluded from the Case-Shiller Index model.
In some markets, such as Chicago and New York City, condominiums account for a large percentage of overall sales.
Lastly, the Case-Shiller Index is published with a “lag,” which renders it useless to buyers and sellers of Bellevue in search of real-time, relevant data. The most recent Case-Shiller Index is published with a 60-day delay, so a report issued in August, for instance, only covers home sales through June.
Making sound real estate decisions is about having timely, relevant data at-hand when it’s needed. The Case-Shiller Index fails in that respect. It’s good for highlighting the U.S. housing market on the whole, as it existed in the past. For real-time market data, though, you’ll want to talk with an active real estate agent.
Do you have questions about mortgages that you want answered? Sammamish Mortgage can help. We are a local, family-owned company based in Bellevue, Washington. We have been serving the entire Pacific Northwest region, including Washington, Oregon, Colorado, and Idaho since 1992. We offer a wide variety ofmortgage programs and products with flexible qualification criteria. Please contact us if you have mortgage-related questions.
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