The S&P/Case-Shiller 20-city metro index of property values increased 5.7% in January 2015, up from 5.6% in December 2015 and 4.4% in January 2015. (Index levels are a 3-month average.) While all 20 cities in the metro index showed a year-over-year increase (with an 11.8% gain in Portland, Oregon topping the list), the rate of increase slowed in some locations: Boston’s home price growth for January, at 3.6%, was down from the 4.5% pace observed in December 2015, for example.
Rising home prices have continued to buoy consumer balance sheets: owners’ equity in household real estate as a percentage of the market value of household real estate climbed to 56.9% in Q4 2015, up from 54.8% in Q4 2014 and well above the 37.1% ratio reached in Q1 2009. Additionally, residential real estate contributed 0.33 percentage points of the 1.4% gain in real GDP in Q4 2015. While affordability is once again becoming an issue, low mortgage rates (3.71% for a 30-year mortgage as of 3/24/16) and rising income growth (aggregate private wage and salary income was 4.5% higher in Q4 2015 than in Q4 2014) should continue to support the outlook for single-family homes in the coming quarters.