Home Prices Continue Defying Gravity and Expectations

Price increases did not slow in the third quarter as expected, the Federal Housing Finance Agency (FHFA) said today. The agency's purchase-only seasonally-adjusted House Price Indexd (HPI) for the quarter shows that prices rose for the 17th consecutive quarter and posted the largest month-over-month gain since at least that in March to April.

The combined report for September and for the third quester is based on home sales price information taken from mortgages sold to or guaranteed by the government- sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. The montly index rose 0.8 percent from August and the quarterly measure was 5.7 percent higher than in the third quarter of 2014. Year-over-year the increase for the entire U.S. was 6.1 percent.

The 8 percent monthly gain crushed analysts expectations. According to Bloomberg, prediction for an increase ranged from 3 to 5 percent.

"The long-anticipated slowdown in home price appreciation did not occur in the third quarter," said FHFA Principal Economist Andrew Leventis. "The factors that have contributed to extraordingary price growth over the last few years - low interest rates, tight inventories, strong buyer confidence, and incporving income growth - continued to drive prices upqard in much of the country. However, as prices continue to rise, reduced affordability will be a stronger market headwind," Leventis said.

Further, when viewed against the prices of other goods and services, which fell by 1.3 percent from the same quarter in 2014, the 5.7 percent increase becomes an inflation-adjusted 7.1 percent.

Home prices rose on an annual basis in 49 states and the District of Columbia, with the exception of West Virginia. The price leaders were the District of Columbia, up 15.4 percent; Colorado, a 12.7 percent increase; Nevada, at 12.4 percent; and Oregon and Florida, both with 10.0 percent gains.

The metropolitan area with the strongest four-quarter price appreciation was North Port-Sarasota-Bradenton, Florida, where prices increased by 16.1 percent. Prices were weakest in El Paso, Texas, where they fell 3.6 percent.

Of the nine census divisions, the Mountain division experienced the strongest increase in the third quarter, posting a 2.4 percent quarterly increase, and a 9.0 percent increase since the third quarter of last year. House price appreciation was weakest in the New England division, with only a 0.2 percent bump up from the last quarter. The division seems to have shaken off those doldrums, however, posting the largest August to September increase of any region, up 1.4 percent. West North Central and East South Central division has the smallest month-over-month appreciation, each at 0.1 percent.

The largest 12-month gain was in the Mountain division, up 9.3 percent. The smallest appreciation occurred in the Middle Atlantic division, at 3.6 percent.


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