US house prices remain at record highs

Economist says supply shortages continue to be a problem

US house prices climbed 1.4% month over month and spiked 19.2% year over year in July, according to the latest Federal Housing Finance Agency House Price Index.

The index showed that home price growth increased from the revised upward appreciation of 1.7% in June. Monthly house price changes in the nine census division ranged from +0.8% in the West North Central division to +1.9% in the South Atlantic division. The annual changes varied from +15.6% in the West North Central division to +25.6% in the Mountain division.

“Record appreciation rates for the US continued in July,” said Lynn Fisher, FHFA deputy director of the division of research and statistics. “Although the monthly pace of increase slowed in most census divisions in July, four areas experienced year over year growth rates in excess of 20%, and all saw annual gains in excess of 15%.”
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CoreLogic deputy chief economist Selma Hepp noted several factors that have created a double whammy for home price growth.

“There’s a surge of millennials approaching the prime home-buying age and are experiencing more flexibility to expand their search locations,” she said. “Additionally, there are move-up buyers with larger budgets who are relocating to more affordable areas where they’re financially able to outbid local residents.”

Hepp added that homebuyers across all ages continue to enjoy historically low mortgage rates but have now also been joined by an influx of investor buyers over the summer. This continued high buyer demand, she said, has offset the improvements in the supply of for-sale homes.