Home prices have continued their steady ascent this summer nationally, but there’s no reason to believe a collapse in prices is on the horizon, per many economists.
Home prices have continued their steady ascent this summer nationally, but there’s no reason to believe a collapse in prices is on the horizon, per many economists. On a national basis, single-family home prices rose by 5.1% in July, per the S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions. Home prices have risen by about 5% annually for the last two years and are approaching the record highs seen before the financial crisis. In seven out of 20 major cities, houses are more expensive than ever.
As housing values have risen, the amount people borrowing hasn’t swelled nearly as much as it did before the financial crisis. Currently, outstanding mortgage debt on family homes for four people or less is 13% below the peak in 2008, per S&P Dow Jones Indices.
“There is no reason to fear that another massive collapse is around the corner. The run-up to the financial crisis was marked with both rising home prices and rapid growth in mortgage debt”, said David Blitzer, chairman of the index committee at S&P Dow Jones Indices. This time, the rise appears to be more gradual and with less leveraging.
Mortgage rates have been at record lows thanks to the Federal Reserve, helping to fuel home sales, but policymakers are expected to raise rates before the year is over. Even so, the impact will likely be gradual. “After such Fed action, mortgage rates would still be at historically low levels and would not be a major negative for house prices,” said Blitzer.
Homes are getting rapidly more expensive out West and the cities with the highest year-over-year price increases were once again Portland (12.4%), Seattle (11.2%) and Denver (9.4%).
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