The S&P Case-Shiller, a composite of single-family home price indices across the U.S., shows national home prices nearing 2006 levels with no sign of slowing down. The 10-city and 20-city composite indices, also published by S&P Dow Jones Indices, are further from their levels before the 2007-08 mortgage crisis. Housing markets in western cities are growing the fastest, with Portland, Denver, and Seattle showing the highest growth over the last six months and exceeding 2006 levels in indices.
Despite this, the Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices says that the possibility of bubble bursting in housing is unlikely. In the September 27th Case-Shiller press report, he states,
“The run-up to the financial crisis was marked with both rising home prices and rapid growth in mortgage debt. Currently, outstanding mortgage debt on one-to-four family homes is 12.6% below the peak seen in the first quarter of 2008 and up less than 2% in the last four quarters. There is no reason to fear that another massive collapse is around the corner.”
Sustained economic growth in the U.S. economy should continue to allow consumers to purchase homes even as prices return to high levels. However, consumers looking to purchase a home should keep an eye on these indices, house prices in their area, and the trends of both so they can buy at the right time and get the right price for their home.
If the Federal Reserve raises interest rates, as they are expected to do before the end of 2016, rates on adjustable rate mortgages (ARMs) will increase as well. Those with ARMs should keep a close eye on interest rates as the economy continues to expand and pressure to raise rates increases.
To download the full press release, click here.
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