The Case-Shiller (CS) National Home Price Index, reported by S&P Dow Jones Indices, rose at a seasonally adjusted annual growth rate of 1.1% in March, down from 3.8% in February. The Home Price Index from the Federal Housing Finance Agency (FHFA) rose at a seasonally adjusted annual rate of 8.4% in March, faster than 6.2% in February.
After the boom and bust, home prices have been recovering from the trough since 2012. As of March 2016, the CS national house price index was at 97% of the February 2007 peak. Nine years after their collapse, house prices are re-approaching their housing bubble peak, but now this level is in line with longer term trend growth.
However, housing markets are local and the pace of price appreciation varied greatly in different markets during the boom, so proximity to earlier peaks may not mean the same thing in different markets.
House prices in Denver and Dallas now exceed their mid-2000s levels but these markets were among the most stable during the boom with the smallest increases and the shallowest declines, so new peaks shouldn’t be seen as warning signs of new bubble conditions.
In contrast several markets have current house prices that are at or near their previous peaks, but these peaks were significantly inflated during the boom, suggesting these markets may have supply and demand imbalances that are re-inflating price bubbles. These markets include San Francisco, Portland OR, and Seattle.
At the same time several markets are at or near peak levels, but the earlier peaks and declines were relatively restrained. This current proximity to earlier peaks suggests price increases reflect house price recovery, not bubbles. These markets include Boston, Charlotte NC, Atlanta, Cleveland, Detroit, Minneapolis, New York and Chicago.
San Diego and Los Angeles are markets that are not as close to their earlier peaks as some markets, but those peaks reflected some of the most inflated house prices. Even a sizable gap between current and peak prices may reflect some ongoing supply and demand imbalance. The Washington DC and Miami markets share a similar distinction.
Of the remaining markets covered in the CS indices Las Vegas, Phoenix and Tampa have among the largest gaps between current and peak house prices. These markets were among the most overheated during the boom but so far appear to be avoiding past mistakes.
Figure 2 shows the boom and bust dynamics of the S&P/Case-Shiller Home Price Indexes for 20 major U.S. metropolitan areas. The bars illustrate peak, trough and current price levels relative to the January 2000 base level.