United States: House prices growth gains speed in February

Robust job gains and wage growth continues to support demand for housing in the U.S., boosting upward pressures on home prices. The S&P/Case-Shiller 20-city home composite index rose a respectable 0.4% in February from the previous month, a seven-month high. The result came in above the 0.2% increase observed in January. When adjusted for seasonal factors, home prices rose an even larger 0.7% from the previous month, coming in below the 0.9% increase seen in January and a notch below market consensus of a 0.8% increase.

On a year-on-year basis, home prices rose across all cities continued to climb, with previously lagging cities now reporting stronger price increases. Home prices growth rose from January’s 5.7% to 5.9% in February, which marks the largest expansion since July 2014. S&P said that Seattle, Portland and Denver, in that order, continued to report the strongest increases in prices of the 20 cities included in the index.

In addition to a robust labor market and strong wage gains, housing affordability has also contributed to the pickup in prices, as S&P comments:

“There are still relatively few existing homes listed for sale and the small 3.8 month supply is supporting the recent price increases. Housing affordability has declined since 2012 as the pressure of higher prices has been a larger factor than stable to lower mortgage rates.”