Sluggish completions push up us house prices

Photo: DenverrJeffrey

Sluggish completions are set to push up house prices in the US, as supply fails to keep up with demand.

Housing starts rose 6.5 per cent in September, according to the Commerce Department  to 1.21 million units, with multifamily accounting for nearly all of it, jumping 17 per cent.

The figures mark the strongest figures since October 2007.

But, as CoreLogic advises, figures taken over a longer period provide a more accurate picture of the market and, while starts are up 18 per cent year-on-year, completions are struggling to keep up, rising only 8 per cent.

Multifamily units again led the way, with a 20 per cent annual rise, but one-unit properties were again weak, with only 3 per cent growth - compared to 12 per cent starts.

"Since it takes 6 months to deliver a house after groundbreaking, completions is the actual new supply that is ready to be sold. What that means for home sales is definite upward pressure on home prices," says the firm.

Indeed, national home prices increased 6.9 per cent year-over-year and 1.2 per cent month-on-month in August 2015, according to the latest CoreLogic Home Price Index Report. While the HPI has increased on a year-over-year basis every month since March 2012, prices are still 6.3 per cent below the April 2006 peak.

Colorado showed the largest HPI gain with a 10.4 percent year-over-year increase, followed closely by Washington (+10.3 per cent) and Nevada (+9.3 per cent). Only Mississippi showed year-over-year depreciation, falling by 0.9 per cent. Nevada home prices were the farthest below their all-time HPI high, still 29.9 per cent lower than the state’s March 2006 peak.