Home prices accelerate in half of U.S. metros

Home-price growth continues to cool on a nationwide basis, but the story isn’t as clear-cut in individual cities. In more than half of the largest U.S. metros, including two of the nation’s most expensive markets — San Jose and San Francisco — home prices accelerated during the summer, according to Attom Data Solutions.

Sales prices picked up steam during the third quarter in 76 of 150 U.S. metros tracked by the company. Most notably, prices accelerated in California’s Bay Area and Silicon Valley, where recent data suggests these markets have been slowing down with fewer sales.

In San Jose, the so-called capital city of Silicon Valley and home base for tech giants Google and Apple, home prices rose by nearly 17 percent year over year in the July-to-September period, Attom reported. That was up from an annual gain of 13.7 percent in the third quarter of 2017.

San Francisco saw prices rise 11.6 percent year over year in the third quarter, up from an annual gain of 8.4 percent in the third quarter of 2017.

Prices in these metros were already at eye-popping levels. In San Jose, for example, the median price of a home stood at $1.13 million at the end of September, up by nearly 57 percent from the pre-recession peak.

San Jose residents need a household income of more than $300,000 annually to afford a median-priced home or a house that falls right in the middle of all homes for sale in the area, according to Attom. Given the recent rise in interest rates, another massive jump in home-price growth there defied expectations.

“Honestly, that surprised me as well,” said Daren Blomquist, Attom’s senior vice president. “San Jose, especially, with that nearly 17 percent appreciation, is really defying gravity.”

Blomquist said San Jose’s tech economy has produced lots of wealthy people in the area and the city also draws international buyers. Home prices in Southern California cities, such as Los Angeles and San Diego, have been slowing down as expected, Blomquist said.

“Given that interest rates are probably not going to go back down and, in fact, may continue to go up, we will likely see that [slowdown in price appreciation] spread northward,” Blomquist told Scotsman Guide News. “Those Bay area counties are just in a little bit more of an insulated environment where there is still strong enough demand to keep the parade of appreciation for longer than in Southern California.”

Prices are also accelerating and defying expectations in places like Boise, Idaho and Las Vegas. The natural trend, though, is slower price growth, Blomquist said. Prices cooled down during the third quarter in several major cities, such as Seattle, Denver, Miami and Dallas, according to Attom. Nationally, the median home price was $256,000 in the third quarter, up 4.8 percent year over year, the slowest annual rate of appreciation in more than two years.

“We have hit a tipping point in many ways,” Blomquist said. “Even before the interest rates really substantially started going up, we were seeing a slowing appreciation. It really started last year.”

Scotsman Guide – November 2018