U.S. home prices hit a new high in October on a closely-watched index released Tuesday, while prices of existing home sales in the Atlanta area edged closer to their pre-recession peak.
The S&P CoreLogic Case-Shiller Indices report showed prices were up nationally by 5.6 percent in October compared to the same month a year ago, and in the Atlanta area, home prices grew by 6 percent in that time.
Metro Atlanta home prices are now near October 2007 levels, a time when prices were just starting their tumble from pre-recession peak in July 2007. The housing collapse helped trigger the financial collapse and Great Recession, and the Atlanta area was walloped by foreclosures and plummeting home values that reverberated through the economy and also tanked local and state tax collections.
But home prices locally have marched steadily, if slowly, upward since their bottom in March 2012, with home sales propelled by historically low interest rates, a rebounding economy and job growth. But tighter lending standards and delays in home purchases by many would-be first buyers have been a headwind on the recovery of metro area prices.
“Home prices and the economy are both enjoying robust numbers,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, said in a news release. But there are some grey clouds on the horizon. Housing affordability remains a concern and price gains continue outpace inflation and wage growth, which Blitzer said can’t happen “indefinitely.”
Rising mortgages rates also are an issue, and as prices rise purchasing a home can be more difficult when prices climb faster than wages.
“Affordability measures based on median incomes, home prices and mortgage rates show declines of 20-30 percent since home prices bottomed in 2012,” Blitzer said. “With the current high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends. Nevertheless, home prices cannot rise faster than incomes and inflation indefinitely.”
The report Tuesday also found that Seattle, Portland and Denver posted the highest gains year-over-year in the 20-city composite index.
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