After a long winter of strengthening home prices, the latest S&P/Case-Shiller Report showed some hints of smaller monthly gains. Thirteen of the 20 cities had smaller year-over-year increases in February; in January only nine saw year-over-year numbers drop. The hint of slower growth shouldn’t alarm anyone; rather the biggest concern in housing today may be the small supply pushing prices higher. That may be one reason that nationally home prices are up 5.3% in the last 12 months, more than twice the rate of inflation.
The table shows how the 20 cities covered by the S&P/Case-Shiller Home Price Indices are doing. In four cities – Denver, Dallas, Portland and San Francisco – prices have surpassed their housing boom peaks set in 2006. Nationally prices are about 5% below the 2006 all-time high. However some of the Sunbelt cities still have a long way to go before they top their local records. Las Vegas is 38% below and Phoenix is 31% below their old highs.
One question asked at each monthly S&P/Case-Shiller release is whether the housing market is back to normal. One way to judge is to look at mortgage defaults. One of the most damaging parts of the financial crisis was mortgage defaults and foreclosures. The chart shows the monthly rate of mortgage defaults from the S&P/Experian Consumer Credit Default Indices and the year-over-year changes in the S&P/Case-Shiller National Home Price index. When one peaks, the other dives to its low point. Currently the mortgage default rate is well under one percent, slightly lower than in 2004.