The latest FNC Residential Price Index™ (RPI), indicated U.S. home prices rose sharply in March, up 1.0% from February at a seasonally unadjusted rate, the fastest in nine months after tepid growth throughout the fall and winter months.On a year-over-year basis, prices continue to enjoy robust growth, rising 5.7% from a year ago. Throughout the first quarter, home prices were up 0.4% from the previous 2015 fourth quarter.“March’s large rebound follows an expected seasonal trend, commencing the arrival of a busy spring homebuying season,” said Yanling Mayer, FNC’s housing economist and Director of Research. “It is also partly driven by persistent low inventory, which has already made this spring’s homebuying more competitive,” added Mayer.
“In fact, we are seeing signs that the supply condition and resulting price bidding are driving prices of entry-level homes to rise much faster than the average property on the market,” continued Mayer.
As of March, the proportion of final sales of foreclosed and REO properties comprises 11.5% of existing homes sales, down from 13.1% in February and 12.7% a year ago. Preliminary April estimate indicates the share of foreclosure sales have fallen into the single digits.
In the for-sale market, March’s asking-price discount fell to 3.5% from February’s 4.3%. Continuing to reflect tight inventory and robust demand, the forward-looking April data indicates the average discount is reaching a three-year low at 2.7%.
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 final sales of REO and foreclosed homes, which are frequently sold with large price discounts, often reflecting poor property conditions.1
The table above shows seasonally unadjusted month-over-month (MOM) and year-over-year (YOY) changes in three RPI composite indices. The national index is based on recorded sales of non-distressed properties (existing and new homes) in the 100 largest metropolitan areas.
2 The 30- and 10-MSA composites capture the price trends in the nation’s largest and leading housing markets.
1The hedonic procedures used to create the index are described in “Hedonic versus repeat-sales housing price indexes for measuring the recent boom-bust cycle,” by Dorsey, R.E., Hu, H., Mayer, W.J., and Wang, H.C., Journal of Housing Economics 19 (2), 75–93.
2The FNC National Residential Price Index is a volume-weighted aggregate price index consisting of 100 major metropolitan areas across different regions of the U.S. All FNC Residential Price Indices are constructed to capture unsmoothed home price trends.
The chart below tabulates the latest MOM and YOY price trends for each MSA in the FNC 30-MSA composite index
On a year-over-year basis, March’s top up-markets:
- San Antonio (3.4%)
- Detroit (2.9%)
- Nashville (2.7%)
- Charlotte (2.6%)
- Cleveland (2.4%)
- Los Angeles, Columbus (2.3%)
- San Diego (2.0%)
Strong gains are seen broadly across the country. Of the 30 cities tracked for their MSA-level price trends, 22 cities showed a February-to-March gain of 1% or more. In San Antonio, home prices rebounded rapidly after declining throughout the winter months. In the South region, the Nashville and Charlotte markets were up 2.7% and 2.6%, respectively.
Broad gains are also seen across the Midwest, led by Detroit (2.9%), Cleveland (2.4%), Columbus (2.3%), and Chicago (1.6%). On the West Coast, Los Angeles (2.3%), San Diego (2.0%), and Riverside (1.0%) led the region in March’s price gain.
On a year-over-year basis, March’s top growth markets:
- Phoenix (13.1%)
- Miami (11.9%)
- Nashville (11.7%)
- Portland (11.3%)
- Orlando (10.8%)
- Las Vegas (10.3%)
At the start of the 6th year into the recovery, Phoenix, Miami, Portland, Orlando, and Las Vegas continue to enjoy robust, double-digit price growth. In Nashville, home prices have reached all-time highs after rising rapidly for 12 consecutive months. March’s 11.7% year-over-year growth is the fastest price acceleration on record.
After leading with rapid recovery in 2013-2015, a number of West Coast cities including Los Angeles, San Diego, Riverside, and Seattle appear to be cooling down with year-over-year growth settling into more sustainable pace at the start of the busy spring homebuying. As of March, home prices in San Francisco and Sacramento are also rising at a more moderate pace than in the previous months.
