Economy Watch: Home Prices Rise Everywhere

U.S. residential prices continued their upward climb in May, according to the latest S&P/Case-Shiller Home Price Indices.

U.S. residential prices continued their upward climb in May, according to the latest S&P/Case-Shiller Home Price Indices on Tuesday. From April to May, the 10- and 20-city composites rose 2.6 percent and 2.5 percent, respectively. Home prices gained 11.8 percent and 12.2 percent for the 10- and 20-city composites indices in the 12 months ending in May 2013.

All 20 cities showed positive monthly returns for May. Ten cities—Chicago, Denver, Detroit, Las Vegas, Miami, New York, Phoenix, Portland, Seattle and Tampa—showed acceleration, according to Case-Shiller. Chicago, for example, posted an impressive monthly gain of 3.7 percent in May. Miami and Seattle had their largest monthly gains since August 2005 and April 1990, respectively.

“Home prices continue to strengthen,” David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, noted in a press statement. “Two cities set new highs, surpassing their pre-crisis levels and five cities—Atlanta, Chicago, San Diego, San Francisco and Seattle—posted monthly gains of over 3 percent, also a first time event.”

Does it add up to a new bubble? Observers are quick to point out that certain short-term events are driving prices in many places, such as the fact that formerly distressed properties are beginning to re-sell at more “normal” prices, which adds an upward element to overall prices. Also, and maybe more immediately, the prospect of yet higher interest rates might have increased demand for houses as buyers hurry to lock in rates.

Residential vacancy rates edge down

The Census Bureau reported on Tuesday that the national vacancy rate for rental housing was 8.2 percent in the second quarter of 2013, 0.4 percentage points lower than during the same quarter a year earlier. The vacancy rate for homeowner housing, which are for-sale units that don’t happen to have any occupants, was 1.9 percent, down 0.2 percentage points for the year.

Owner-occupied housing units made up 56.2 percent of total U.S. housing units, while renter-occupied units made up 30.2 percent of the inventory in the second quarter 2013, the bureau also reported. Vacant year-round units comprised 10.3 percent of total housing units, while 3.3 percent were for seasonal use. About 2.7 percent of the total units were for rent, 1.1 percent were for sale only, and 0.9 percent were rented or sold but not yet occupied (such as student housing in the summer).

Homeownership stood at a rate of 65 percent of U.S. households in 2Q13, unchanged from the first quarter. But over the longer term, homeownership has been dropping. During the second quarter of 2012, 65.5 percent of all householders owned their dwellings.

Wall Street had a mixed day on Tuesday, but mostly it was a trip to Nowheresville, with the Dow Jones Industrial Average down 1.38 points, or a scant 0.01 percent. The S&P 500 gained 0.04 percent and the Nasdaq was up 0.48 percent.