The Case-Shiller 20-city house price index for February 2013 was released over night, which revealed an ongoing recovery in US house prices, with prices lifting by 1.2% over the month, 3.2% over the quarter, and 9.4% over the year. It was the biggest yearly price gain since May 2006 (see next chart).
Despite the strong result, one of the creators of the Case-Shiller house price index, Dr Robert Shiller, dampened down expectations of a bull market in US home prices, forecasting that price growth would match the rate of inflation in the decade to come:
“There’s a lot of excitement in the housing market now but it might be just short term”… When asked where this all leaves the housing market 10 years from now, Shiller says home prices will be “about where they are now” after adjusting for inflation.
There also appear to be some short-term headwinds building, with both the University of Michigan and Conference Board consumer sentiment indices turning down recently which, given past correlations, suggests weaker house price growth ahead (see next chart).
