Strong home sales, limited supply lift US home prices in May

Jul 28, 2015, 9:42 AM

WASHINGTON (AP) — U.S. home prices rose steadily in May, pushed higher by a healthy increase in sales this year.

The Standard & Poor’s/Case-Shiller 20-city home price index climbed 4.9 percent in May from 12 months earlier, down slightly from a 5 percent pace in April, according to S&P Dow Jones Indices.

Home sales have jumped in recent months as an improving economy boosts hiring and enables more people to afford a purchase. Yet the higher sales haven’t encouraged more people to sell their homes, leaving supplies tight and driving up prices.

And separate data released by the Census Bureau Tuesday pointed to the limited impact of the three-year old housing recovery: The proportion of Americans owning their own homes has continued to decline and is now at the lowest level since 1967.

Still, prices are soaring higher in some cities, according to Case-Shiller: They rose 10 percent from a year ago in Denver, 9.7 percent in San Francisco and 8.4 percent in Dallas. Washington, D.C. posted the smallest increase at 1.3 percent. Prices rose in all 20 cities from a year earlier.

The Case-Shiller index covers roughly half of U.S. homes. The index measures prices compared with those in January 2000 and creates a three-month moving average. The May figures are the latest available.

Sales of existing homes increased 3.2 percent in June to a seasonally adjusted annual rate of 5.49 million, the National Association of Realtors said last week. That is the fastest pace since February 2007. Sales are up from an annual pace of just 4.8 million in January.

Some of the accelerated pace has likely been driven by higher mortgage rates and an expected decision by the Federal Reserve to start raising short-term interest rates this year. Most economists forecast that decision will occur in September.

Yet the supply of available homes hasn’t kept up with rising sales. The number of homes listed for sale rose 0.4 percent in the past year, the Realtors said, while sales have increased 9.6 percent.

That has led to aggressive efforts by buyers to grab homes: The typical property was on the market for just 34 days in June, down from 40 in May and the shortest time since the Realtors’ group began tracking the data in May 2011.

The current pace of home sales is roughly what might be expected in a healthy housing market. Yet other data point to some ongoing weaknesses.

The percentage of homeowners continues to decline: Just 63.4 percent of Americans owned homes in the April-June quarter, down from 63.7 percent in the first three months of the year. That is below the peak of 69 percent in 2006, at the height of the housing bubble.

Meanwhile, more Americans are moving out on their own, after doubling up with friends or living with their parents. That is a good sign for the economy because the creation of new households leads to purchases of more furniture, appliances and other goods.

But in the past year, all the new households have moved into rentals, the Census Bureau report shows.

Builders are ratcheting up the construction of apartments in an effort to keep up with the increased demand. But single-family home building remains lackluster. The pace of single-family home construction has risen 9.1 percent in the past year, while purchases of new homes have jumped at more than double that pace.

The sluggish rate of new homebuilding is depriving the housing market of a crucial source of supply. Much of the overall gain in homes available for sale typically comes from new home construction. Sellers of existing homes, meanwhile, frequently buy other homes. As a result, sellers of existing homes usually add little to the overall number of homes for sale.

The proportion of home purchases from first-time buyers is also far below typical levels. First-time buyers create greater demand and enable current homeowners to trade up to larger homes.

“Without a boost in first-timers, there is less housing market activity, fewer existing homes being put on the market, and more worry about inventory,” David Blitzer, chair of the index committee at S&P Dow Jones Indices said.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

World News

A fisherman watches smoke rise after Russian forces launched a missile attack on a military unit in...
Associated Press

Russia’s Black Sea Fleet headquarters hit by drone strike

An explosive device carried by a makeshift drone blew up Sunday at the headquarters of Russia's Black Sea Fleet on the Crimean Peninsula.
12 days ago
Medical syringes are seen with 'Monkeypox' sign displayed on a screen in the backgound in this illu...
Associated Press

Monkeypox declared a global emergency by UN health agency

The expanding monkeypox outbreak in more than 70 countries is an “extraordinary” situation that qualifies as a global emergency.
20 days ago
Chinese paramilitary policemen march in front of the Japanese embassy where the Japanese flag is fl...
Associated Press

Japan’s ex-leader Shinzo Abe assassinated during a speech

TOKYO (AP) — Former Prime Minister Shinzo Abe was assassinated Friday on a street in western Japan by a gunman who opened fire on him from behind as he delivered a campaign speech — an attack that stunned a nation with some of the strictest gun control laws anywhere. The 67-year-old Abe, who was Japan’s […]
1 month ago
Firefighters hose down a burning car after a strike hit a residential area, in Kramatorsk, Donetsk ...
Associated Press

Russia taking ‘operational pause’ in Ukraine, analysts say

Analysts say Russia may be taking an "operational pause" in eastern Ukraine to reassemble forces for a significant offensive.
1 month ago
Prime Minister Boris Johnson enters 10 Downing Street, after reading a statement in London, Thursda...
Associated Press

One scandal too many: British PM Boris Johnson resigns

LONDON (AP) — Prime Minister Boris Johnson announced his resignation Thursday after droves of top government officials quit over the latest scandal to engulf him, marking an end to three tumultuous years in which he tried to bluster his way through one ethical lapse after another. Months of defiance ended almost with a shrug as […]
1 month ago
Ukrainian servicemen carry the coffin with the remains of Army Col. Oleksander Makhachek during a f...
Associated Press

As Ukraine loses troops, how long can it keep up the fight?

ZHYTOMYR (AP) — As soon as they had finished burying a veteran colonel killed by Russian shelling, the cemetery workers readied the next hole. Inevitably, given how quickly death is felling Ukrainian troops on the front lines, the empty grave won’t stay that way for long. Col. Oleksandr Makhachek left behind a widow, Elena, and […]
2 months ago

Sponsored Articles

...
Mayo Clinic Orthopedics and Sports Medicine

Why your student-athlete’s physical should be conducted by a sports medicine specialist

Dr. Anastasi from Mayo Clinic Orthopedics and Sports Medicine in Tempe answers some of the most common questions.
...
Carla Berg, MHS, Deputy Director, Public Health Services, Arizona Department of Health Services

Vaccines are safe if you are pregnant or breastfeeding

Are you pregnant? Do you have a friend or loved one who’s expecting?
...
CANVAS ANNUITY

Best retirement savings rates hit 4.30%

Maximize your retirement savings with guaranteed fixed rates up to 4.30%. Did you know there is a financial product that can give you great interest rates as you build your retirement savings and provide you with a paycheck for life once you retire? It might sound too good to be true but it is not; this product is called an annuity.
Strong home sales, limited supply lift US home prices in May