U.S. Home Prices Increased 6.2% in November

The Realtor Building
The Realtor Building on Michigan Avenue, Chicago. Feb. 1, 2018.

By Ang Gao

Medill Reports

The S&P Corelogic Case-Shiller Home Price Index rose 6.2 percent in November, up slightly from 6.1 percent in the previous month. The number is unadjusted without considering inflation.

A low inventory of houses in the market, especially a shortage of low-end houses, is putting pressure on home prices, said Bryce Gill, an economic analyst at First Trust Advisors.

Unsold inventory of existing homes for sale is at a 3.2-month supply at the current sales pace, which is down from 3.6 months a year ago and is the lowest on record since 1999, according to the National Association of Realtors website.

“And we only built less than 1.2 million new houses in 2017, while usually 1.5 million new houses need to be built in the U.S. to keep up with population growth,” Gill said.

Government regulations on houses at all levels account for 24.3 percent of the final price of a new single-family home, according to the National Association of Home Builders website.

This makes more developers turn from building low-end houses to luxurious houses in pursuit of wider margins, Gill said.

According to data released by National Association of Realtors, sales of housing costing from 0 to $100,000 went down by 16 percent in December, and sales of high-end houses costing more than $1 million went up by 12.9 percent compared with a year ago.

The demand for houses has been growing since the financial crisis in 2007, and this contributes to the home price increase, said Andrew Opdyke, an economic research assistant at First Trust Advisors.

“With the unemployment rate declining and people getting more comfortable with finance, we are sort of shifting from renting to buying houses,” Opdyke said.

Seattle’s home price gain ranks the highest among 20 cities, with an increase of 12.7 percent. Second is Las Vegas, where prices rose 10.6 percent in November. Home prices in Chicago increased 3.6 percent.

“In 2019 there will be more buildings in Chicago, especially if Amazon is going to build the second headquarter here,” said David Berger, a professor at Northwestern University’s Department of Economics. “And most of them might still be luxurious buildings.”

The national home price increase may remain steady or even slow down in the future, because there will be greater supplies of houses in the market and sellers will begin a competition to get more buyers, Gill said.

Photo at top: The Realtor Building on Michigan Avenue, Chicago. Feb 1, 2018.(Ang Gao/MEDILL)