The latest FNC Residential Price Index™ (RPI) shows the U.S. housing market continued to recover, recording in March the 13th consecutive price increase. In recent months, the ongoing housing recovery has maintained its pace with steady and persistent gains in home prices despite signs of continued job market weakness and soft economic growth.
Low interest rates continue to be a key driver of rising housing demand. The market is also gaining momentum on signs of improved credit and more availability of leverage as mortgage lenders continue to experience rising profits. Foreclosure inventory continues to drop, with distressed sales contributing only 18 percent to total home sales, down from 24.5% 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 March home prices rose 0.4 percent from the previous month, and were up 5.5 percent from a year ago. On a quarterly basis, home prices rose 0.7 percent during the first quarter. When compared to the same quarter in 2012, the quarterly price gain was 5.7 percent. The two narrower composite indices (30-MSA and 10-MSA composites) show similar month-over-month increases but faster year-over-year accelerations at 6.7 percent and 7.4 percent, respectively.
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.
Twenty-two of the component markets tracked by the FNC 30-MSA composite index show higher prices in March. Most notably, home prices in Phoenix continue to accelerate rapidly even after rising at a rate of 2.1 percent per month for 13 straight months. The city’s foreclosure activities have dropped rapidly, with foreclosure sales accounting for only 11.2 percent of total home sales–the lowest since 2007.
Amid widening signs of a sustained housing recovery, a number of the nation’s major housing markets continue to show lagging performance. Among them, Chicago, Baltimore, St. Louis, Cleveland, and San Antonio experienced only a small price gain in the last 12 months. On a quarterly basis, home prices weakened between Q4 2012 and Q1 2013 in Chicago, Portland, Baltimore, Minneapolis, Houston, and St. Louis, despite that these market all seem to have turned the corner toward recovery.