FNC’s latest Residential Price Index™ (RPI) indicates that U.S. property values continue to rise. Home prices reached a 20-month high following a robust spring/summer homebuying season. In August, home prices rose for the sixth consecutive month, consistent with signs of strengthening market conditions that are led by rising existing-home sales and declining foreclosure activities. Foreclosure sales, down from 23% a year ago to 17.4% in August, continue to play out favorably on current price trends.
Nationwide, August 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 0.3% from the previous month. On a year-over-year basis, home prices rose 1.5% from August 2011. Year to date, home prices were up nearly 5.0% from January.
FNC’s RPI is the 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.1 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 FNC RPI composites (the National, 30-MSA, and 10-MSA indices) show similar up-trend, rising month-to-month for six consecutive months since March.2 There are signs that the upward momentum subsided somewhat in August, with the two broader indices up only 0.2-0.3% from July. On a year-over-year basis, home prices nationwide strengthened modestly, rising 1.5% from a year ago. All three indices hit 20-month highs in August.
The majority of the markets tracked by the FNC 30-MSA composite index show continued price improvement in August, although generally at a subdued pace. (See the FNC Residential Price Index table.) Month-to-month, home prices rose 3.1% in Los Angeles, 2.2%-Phoenix, 2.1%-Sacramento, 1.7%-Detroit, 1.6%-Columbus. Based on a three-month moving average (June, July, and August), Detroit, Phoenix, San Francisco, and Los Angeles show the best price momentum, averaging 2.8%, 2.7%, 1.7%, and 1.5% per month, respectively.
Since last month, more component markets are exhibiting positive year-to-year growth, led continually by Phoenix at 13.3% and followed by Detroit-7.6%, Denver-6.8%, and Miami-6.7%. Most notably, the Phoenix market continues to lead the housing recovery with strong growth momentum. Between January and August, home prices in the Phoenix area rose 15.2%, or an average of 2.2% per month. All markets show positive year-to-date (YTD) price movement that averages 5.4%. Significant YTD appreciation is seen in Detroit-12.0%, San Francisco-8.8%, Sacramento-7.9%, Washington, D.C.-7.8%, and Los-Angeles-7.4%.
1 The hedonic procedures used to create the index are described in “Hedonic versus repeat-sales housing price indexes for measuring the recent boom-bust cycle,” by Dorsey, R.E., Hu, H., Mayer, W.J., and Wang, H.C., Journal of Housing Economics 19 (2), 75–93.
2 The FNC National Residential Price Index is a volume-weighted aggregate price index consisting of 100 major metropolitan areas across different regions of the U.S. All FNC Residential Price Indices are constructed to capture unsmoothed home price trends.
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