Strong Rise in Home Prices

The twenty-city S&P/Case-Shiller Home Price Index (which is the leading index for the U.S. residential housing market – tracking changes in the value of residential real estate) saw a 10.9% rise in home prices in the twelve months ending in March.  This is the biggest jump in nearly seven years.

This strong rise in home prices has been attributable to a tight supply of homes available for sale, a resurgence of investor demand, and cheap borrowing costs for both suppliers and borrowers.

In our view, we expect home prices to continue rising, although at a more moderate pace.  Higher asking prices will begin to encourage would-be sellers to come off the sidelines and place their homes on the market.  This increase in the available supply of properties for sale should help temper house price inflation – countering fears that the U.S. housing market is again entering bubble territory.

Additionally, even after ten straight months of year-over-year gains, the twenty-city S&P/Case-Shiller composite price index is still 28 percent below its previous peak in July 2006.