The latest FNC Residential Price Index (RPI) for November shows strong growth of home prices during the third quarter of 2013 as the housing recovery continues to broaden across the country. The index, constructed to gauge the price movement among the underlying non-distressed home sales, increased 2.5 percent between the second and third quarters, making the third-quarter growth the fastest in the current recovery.
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.
Rising home sales and relatively low foreclosure sales are the key drivers of continued increases in home prices. As of September, foreclosure sales nationwide accounted for 13.4 percent of total home sales, up slightly from August’s 12.7 percent, but down from 16.6 percent a year ago. Home prices are expected to grow at a more moderate pace in the coming months because housing demand tapers off in the winter. In another sign of slower growth ahead, the leading October sales-to-list price ratio fell to 96.0 from 96.5 in July and August.
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 September home prices increased from the previous month at a seasonally unadjusted rate of 0.5 percent. In a sign of moderating month-over-month price momentum, September’s price increase has tapered off compared to July and August. On a year-over-year basis, home prices were up a modest 6.2 percent from a year ago, or 5.7 percent if measured quarterly. The 30-MSA and 10-MSA composites exhibit similar month-over-month price momentum but faster accelerations in year-over-year growth at 6.7 percent and 6.8 percent, respectively.
Twenty-seven metro areas tracked by the FNC 30-MSA composite index show rising prices from August to September, led by Miami, Baltimore, Charlotte, N.C., and Riverside, Calif. — each at about 2.0 percent. Las Vegas, Los Angeles and Phoenix also recorded a sizable increase in September at 1.4 percent, 1.2 percent, and 1.2 percent, respectively, after a relatively flat August month. Meanwhile, home prices in Denver declined for the second month in a row after first showing signs of weakening in August. The city’s foreclosure sales picked up slightly in recent months. St. Louis, on the other hand, saw a significant increase of foreclosure sales in August and September, which likely caused the 1.3 percent drop in home prices. In September, nearly 30 percent of the city’s home sales were foreclosure sales, up from 19.5 percent a year ago.
As of September, 15 MSAs have shown double-digit price growth since early 2012. Continuing to lead in the recovery are the markets in high distress during the 2008-2009 mortgage crisis, including Phoenix, Las Vegas, Riverside, Calif., Los Angeles, and Orlando, Fla. The 100-MSA composite showed an 11.0 percent cumulative price recovery nationwide. In comparison, the recoveries in Chicago, St. Louis and Columbus, Ohio are significantly lagging behind the national average.