Home prices are still rising, but at a slower pace. While it sounds crazy, this could be a good thing…
Just like yesterday’s post about Existing Home Prices and New Home Sales, today is yet another big picture post. Don’t get me wrong though because it is great news that the latest Case Shiller Home Price Index shows rising home prices. As a matter of fact, home prices are growing at the highest rates since the peak of the housing bubble in 2006. So what did Case Shiller say?
- The National Index grew 7.1% in the second quarter and 10.1% over the last four quarters.
- The 10-City increased 11.9% over the past 12 months
- The 20-City Composites increased 12.1% over the past 12 months
Some people are becoming concerned we might be seeing another bubble in home prices. However, June’s home prices are still about 23% than the prices back before the bubble burst. While it is great to see home prices increasing, nobody wants to see another bubble!
I will admit that increases like this does mean there is a possibility that home prices could decrease. Heck, it is always a possibility that home prices can decrease! But David M. Blitzer, chairman of the Index Committee and S&P Dow Jones Indices, noted that “the monthly city-by-city data show the pace of price increases is moderating.”
Check out the chart below showing US home prices from Case Shiller via their 20-city Index. The red line is Non Seasonally adjusted and the blue line is seasonally adjusted:
The Take Away
I hate to repeat myself but just like I pointed out in yesterday’s post, mortgage rates remain historically low. Yes they have risen sharply over the last few weeks. However, increasing mortgage rates could mean we will see slower growth in home prices.
And we are still waiting to see what happens with the Fed and quantitative easing. I would say it isn’t so much as question of IF but when this happens. Remember that when the Federal Reserve “tapers” QE it will likely cause mortgage rates to rise.
Plus we have the unrest in Syria, the upcoming debt ceiling debacle (again) and the possibility that Fannie and Freddie may be eliminated to worry about. All of these factors make the always interesting world of real estate even more interesting.
However, since this is a big picture post, maybe you need to focus on the big picture:
Rates are still historically low.
Home prices may have increased but are still lower than just a few years ago.
It is still a great time for buying a home.
The real question is IF it is a great time for YOU to buy a home?