The Federal Housing Finance Agency (FHFA) released its monthly
today on U.S. home prices in May, based on its House Price Index
(HPI) for houses financed or guaranteed by Fannie Mae or Freddie Mac. According
to the FHFA, home prices increased in May by 0.8% from April to an index level
of 188.06, which was the highest level for home prices since August 2010 (see
top chart above). The April-May increase in the HPI was the fourth
back-to-back monthly price increase starting in February, and was the largest
four-month increase in home prices (3.47%) since the fall of 2005.
Over the last year, home prices have increased by 3.7% since May 2011, and
that annual gain was the largest yearly increase in home prices since
September 2006, almost six years ago (see bottom chart). It was also the first time of four consecutive annual increases since the summer of 2007.
In related housing news today, leading real-estate information provider
Zillow reported that its Home Value Index
increased in the second quarter by
0.2% from last year, marking the first annual gain in its measure of home
prices since 2007. Zilllow's chief economist Stan Humphries declared that
the increase in home prices for the first time in almost five years means that
the U.S. real estate market has finally reached a bottom and has now entered a
new period of gradually increasing home values.
The evidence continues to mount that we've
passed the bottom of the U.S. housing market, as we continue to see sales gains
for both new and existing homes, and gradual but ongoing increases in home
prices according to various sources like the FHFA, Zillow, CoreLogic
and the National
Association of Realtors
(median existing-home price in June was the highest
since 2008). Moreover, home
reached a five-year high this month, and the S&P
has gained 20% over the last year (compared to an
overall flat stock market), which provides additional evidence of a real estate
recovery. With record-low mortgage rates and pending
at the highest level in two years, we can look for more improvements
in the real estate market going forward through the rest of the year.