The latest FNC Residential Price Index (RPI) indicates that U.S. property values rose again in February, continuing a trend that began in the spring of 2012, which has become widely recognized as the beginning of the housing market’s recovery. In February, the FNC RPI recorded a 28-month high after rising for 12 straight months. For the 12 months through February, the index increased 6.1 percent — its fastest acceleration since July 2006.
 
Low home prices as well as low interest rates continue to drive investor activities and pent-up demand, pushing prices higher. Despite rising prices, the supply remains limited as foreclosure activities decline. Meanwhile, the supply from potential trade-up buyers remains constrained by current prices, which are still too low to allow many existing homeowners to capture equity appreciation. Inevitably, the demand from potential trade-up buyers remains constrained. The median sales-to-list price ratio in February was 95, up from 93.8 in January and 90.3 a year ago. Foreclosure sales were down to 20.2 percent from 26.5 percent a year ago. 
 
Based on recorded sales of non-distressed properties (existing and new homes) in the 100 largest metropolitan areas, the FNC 100-MSA composite index shows that February home prices rose 0.2 percent from the previous month and were up 6.1 percent year over year from the same period in 2012. The two narrower composite indices also show a small month-over-month price increase but greater year-over-year change at 7.1 percent and 7.9 percent respectively for the nation’s top-30 and top-10 housing markets. 
 
FNC’s RPI is the mortgage industry’s first hedonic price index built on a comprehensive database that blends public records of residential sales prices with real-time appraisals of property and neighborhood attributes. As a gauge of underlying home values, the RPI excludes sales of foreclosed homes, which are frequently sold with large price discounts, reflecting poor property conditions. 
 
Eighteen of the component markets tracked by the FNC 30-MSA composite index show higher prices in February. Phoenix and Las Vegas continue to exhibit the strongest price momentum, where prices rose nearly 2 percent again in a single month. In Phoenix, home prices shot up nearly 30 percent in the last 12 months, averaging more than 2.2 percent per month. The city’s rapid price climb is attributable to active investment purchase of distressed properties that has pushed up overall home prices. More moderate future price movement is expected with declining foreclosure activities. In February, foreclosure sales made up 14 percent of total home sales, down from 23.4 percent a year ago.
 
On a year-over-year basis, all 30 component markets show higher prices than a year ago, but the degree of the recovery remains inconsistent with many hard-hit markets during the housing crash, exhibiting a stronger comeback. A double-digit price increase is seen in Phoenix, Las Vegas, Detroit, San Francisco, Denver, Sacramento and San Diego. Among them, San Francisco appears to be the best seller’s market where the median sales-to-list price ratio is 102.1.