OXFORD — FNC’s latest Residential Price Index (RPI) indicates that U.S. residential property values continue to gain traction amid signs of slower economic growth and a stagnant labor market.
Home prices rose again in June for the fourth consecutive month. Nationwide, June home prices — based on recorded sales of non-distressed properties (existing and new homes) in the 100 largest metropolitan areas – were up at a seasonally unadjusted rate of 1.1 percent from the previous month. On a quarterly basis, home prices rose 2.7 percent during the second quarter, the largest increase in six years. Year to date, home prices were up nearly 4.0 percent since January.
A decrease in downward pressure from fewer sales of distressed properties continues to be an important factor in driving the market up. Rising demand has narrowed the gap between homeowner’s asking prices and final sales prices to a five-year low, while in the meantime asking prices have risen to a four-year high.
As a gauge of underlying home value, the RPI excludes sales of foreclosed homes, which are frequently sold with large price discounts reflecting poor property conditions.
All three RPI composites (the National, 30-MSA, and 10-MSA indices) show strong month-to-month price momentum during the second quarter. On a quarterly basis, each composite index gained nearly 3.0 percent between the first and second quarter. In the meantime, the indices’ year-to-year trends continue to show rapid decelerations in the pace of price declines. Nationally, June home prices are down only 0.2 percent from a year ago. If the current trend continues, July will likely mark the first time since the housing crash that home prices will have risen over the previous year.
With only a few exceptions, most markets tracked by the FNC 30-MSA composite index show continued price improvement in June. Month-to-month, home prices rose 4.2 percent in Phoenix; 3.3 percent in Baltimore, 3.2 percent in Detroit, 2.8 percent in Cincinnati; 2.4 percent in Tampa; and 2.0 percent in New York. A few markets including Chicago; San Diego; Portland, Ore.; Riverside, Calif.; and, San Antonio, Texas, showed slight price decline between May and June. St. Louis recorded a 2.1 percent decline.
An increasing number of markets are exhibiting positive year-to-year change, led by Phoenix at 6.2 percent. In Miami, seven consecutive months of rising prices have pushed the year-to-year change into positive territory at 1.8 percent.
The Phoenix market stands out with its strong growth momentum in recent months. Between January and June, home prices in the Phoenix area rose 10.7 percent, or an average of 2.1 percent per month for five months. On a quarterly basis, the market is up 5.3 percent during the second quarter, only trailing slightly behind Washington, D.C. With the exception of Denver, all other 29 markets show positive second-quarter growth.