After 10 long years, U.S. home prices finally climbed back to the record peak set in mid-2006 before the recession decimated the market.
The average price for a home in September climbed 0.1 percent higher than the peak of July 2006, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Indices.
The new high comes amid a four-year recovery from the nadir of the market in 2012, when prices had fallen 27 percent from their record high, the Wall Street Journal reported. The index remains roughly 16 percent below the peak when adjusted for inflation.
While it’s true that housing has lagged behind other sectors in the economy in the past few years, there are signs that there’s more room to run. In October, single-family housing starts rose 11 percent and the share of first-time buyers climbed to 33 percent from 31 percent a year earlier.
Case-Shiller co-developer Robert Shiller of Yale University said many homeowners who are finally seeing the equity return to their homes will get a psychological boost from the new record in values.
“It creates an atmosphere that the sky is the limit,” he said.
Others, however, expressed caution that pricing may be getting away from economic fundamentals.
“It’s not clear with the degree of [economic] growth that we’ve had that we should have expected prices to rise this much,” Fannie Mae chief economist Doug Duncan said. “We have a caution light on.”
Historically low interest rates are one reason home prices have risen so quickly, though rates could rise in the future and slow down growth. [WSJ] – Rich Bockmann