Home prices are on the rise; the most recent FNC Residential Price Index™ (RPI) shows U.S home prices made a climb of nearly 7 percent from March to April, the largest price acceleration since June 2012.
What is the driving force behind this acceleration? One possible cause may be the rising seasonal demand as we make way into spring and summer. In addition, improved credit availability, low interest rates, and low home prices continue to add momentum to the housing recovery.
Signs of rising mortgage rates – which have been hovering at historical lows in the last 10 months – have likely drawn out additional pent-up demand. Foreclosure activities continue to drop, with distressed sales contributing only 16.0% to total home sales, down from 17.8 percent in March and 21.6 percent a year ago. The median sales-to-list price ratio in April was 95.5, up from 93.7 in January and 92.5 a year ago.
Based on recorded sales of non-distressed properties (existing and new homes) in the 100 largest metropolitan areas, the FNC 100-MSA composite index shows that April home prices rose much faster than in the previous months. The two narrower indices (30-MSA and 10-MSA composites) similarly recoded a nearly 1.0 percent increase.
On a year-over-year basis, home prices were up 4.6percent from a year ago. The indices have been revised downward for the prior months, resulting in more moderate annual price accelerations.
FNC’s RPI is the mortgage industry’s first hedonic price index built on a comprehensive database that blends public records of residential sales prices with real-time appraisals of property and neighborhood attributes. As a gauge of underlying home values, the RPI excludes sales of foreclosed homes, which are frequently sold with large price discounts reflecting poor property conditions.
Twenty-five of the component markets tracked by the FNC 30-MSA composite index show higher prices in April, and home prices were up by 1.0 percent or more in nearly a third of the markets, led by Phoenix at 2.0 percent, which has seen a nearly 30 percent price jump in the last 12 months or an average of 2.2 percent per month. Houston, Columbus, Cleveland, and San Antonio show small price declines during the month.
Year over year, Phoenix, Las Vegas, Sacramento, and San Francisco show the largest price increase at 29.1 percent, 15.8 percent, 11.6 percent, and 11.0 percent respectively. Lagging behind the national trends are Baltimore, San Antonio, Columbus, and Chicago where home prices in the last 12 months remain relatively flat. Chicago continues to track only second to Detroit in foreclosure sales, with nearly 1-in-3 homes sold during April being foreclosure sales.
Reprinted with permission from RISMedia. ©2013. All rights reserved.