Have Chicagoland home prices in finally turned the corner?
Home prices in the Chicagoland area rose 0.9 percent from February to March and 3.4 percent from March 2014, according to the latest Case-Shiller Home Price Indices from Standard & Poor’s.
Although those numbers do not appear impressive on the surface – especially compared to San Francisco’s 10.3 percent yearly growth – they represent a considerable improvement from February, when Chicagoland home prices fell 0.1 percent on a monthly basis.
Home prices have been icy in Chicagoland for some time now, but the latest Case-Shiller suggests that warmer temperatures may finally thaw the marketplace.
March Case-Shiller – National Home Prices Rise
On the national scene, the home-price narrative was largely positive:
- The 10- and 20-City Composites were up 4.7 and 5.0 percent year-over-year, while the National Home Price Index rose 4.1 percent year-over-year (compared with a 4.2 percent increase in the previous index).
- Ten cities reported higher price increases in March than in February, but 10 cities also saw their prices decrease on an annual basis, led by Cleveland’s 1.2-percent drop.
- On a monthly basis, the National index rose 0.8 percent, while the 10- and 20-City Composites posted similarly strong increases of 0.8 and 0.9 percent; only one city, New York, saw prices fall month-to-month.
Are We Experiencing Another Housing Bubble in 2015?
Home prices have now risen on a year-over-year basis for 35 consecutive months. Additionally, the current annual rate of 4.1 percent is far above the historical average (which has hovered around 1.0 percent since 1975), and is also greater than the growth of per capita personal income (3.1 percent) and wages (2.2 percent).
So impressive have home price gains been that some are uttering the word “bubble,” but as David M. Blitzer, the managing director and chairman of the Index Committee for S&P Dow Jones Indices, pointed out in his analysis, that 4.1 percent annual rate is far below the double-digit increases that the Case-Shiller reported in 2013. Furthermore, with prices rising faster than incomes and wages, the pool of prospective homebuyers has shrunk, and that should slow home price gains further.
So though home prices have risen aggressively since 2012, the overall marketplace does not suggest another bubble is in effect.
“I would describe this as a rebound in home prices, not bubble and not a reason to be fearful,” Blitzer said.