Housing prices in the US rose strongly in January due to supply shortages. The US housing index S&P CoreLogic Case-Shiller rose by 6.2% in January compared with the same period of the previous year. It almost reached the 6.3% growth in December, recording the fastest growth on an annual basis for almost three years. The rise in January is in line with economists’ expectations.
At the beginning of the spring, which is considered as home buying season, the buyers face higher prices and fierce competition for a limited supply of available homes. But the strong labor market has inspired confidence in US consumers, including the younger generation, to buy a home.
The prices rose by 12.9% in Seattle, 11.1% in Las Vegas and 10.2% in San Francisco. Chicago and Washington show the weakest growth on an annual basis of 2.4%. The rising housing prices outweigh wage growth and inflation.
The homes for sale are small and at the current pace the sales are sufficient for 3.4 months, down from an average of 6 months since 2000.
The limited supply, fierce competition and rising prices make many buyers stay longer in the market in the hope of finding the right home at the right price. Overall, the house prices in the US are 6.3% above their peak since July 2006. They fell sharply after the bubble burst and reached bottom in February 2012. Since then, prices have jumped by 46.5%.
The interest rates on mortgages have risen in 10 of the past 11 weeks, but higher interest rates have not yet seriously affected housing demand.
The National Association of Real Estate Brokers reported last week that sales of existing homes in the country rose by 3% on a monthly basis in February. The sales of new homes declined for the third consecutive month in February on a monthly basis but increased by 1.2% on an annual basis.