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The latest ANALYTICS Or ig i nat ion December Prices Post Largest Annual Increase in 6 Years CoreLogic's Home Price Index registers an 8.3 percent year-over-year increase in December, marking the 10th straight month of gains. rise by about 2.5 percent and consumers projected a 1 percent increase, according to a chart in the report. But, with the low supply of inventory, Capital Economics anticipates much bigger gains. Recently, the National Association of Realtors reported existing home sales in December fell to a 4.4-month supply, the lowest level since May 2005, while the new home sales report from the Census Bureau/HUD says there is a 4.9-month supply of homes for sale. "At face value, the 4.9 months' supply of unsold stock currently on the market in December points to house prices rising by as much as 10 percent year-year. For now, our forecast is for a 5 percent rise during 2013," wrote Paul Diggle in the report. The tightening in supply is not expected to continue, however. Capital Economics says it expects to see a rebound in housing starts and for the number of willing sellers to rise, which means inventory will hit a bottom soon. The firm also noted the three major house prices indices—Case-Shiller, FHFA, and CoreLogic—posted yearly price gains at around 5 percent and as high as 7.4 percent in November. The M Report se c on da r y m a r k e t T he low supply of housing stock recently reported is giving Capital Economics reason to believe home price forecasts under 5 percent are actually conservative estimates. Realtors in December expected prices to rise by about 3.5 percent over the next year, while consumer estimates were more modest at 2.5 percent for the same time period, the analytics firm noted in its monthly housing report. The estimates show a growing optimism among those groups. For example, in March 2012, Realtors expected prices to a na ly t ic s Analysts at Capital Economics say we should be thinking bigger when it comes to prices in 2013. s e r v ic i ng Economists Anticipate Larger Price Gains National home prices ended the year by posting their biggest annual gain since May 2006, and prices rose in December for the 10th consecutive month, CoreLogic reported. The data provider's Home Price Index (HPI) registered a year-over-year increase of 8.3 percent in December when including distressed sales. From November to December, prices barely moved higher, increasing just 0.4 percent. In January, the forwardlooking Pending HPI projects prices will rise 7.9 percent on a yearly basis in January, but fall by 1 percent on a monthly basis due to the typical seasonal decline. "We are heading into 2013 with home prices on the rebound," said Anand Nallathambi, president and CEO of CoreLogic. "The upward trend in home prices in 2012 was broad based with 46 of 50 states registering gains for the year. All signals point to a continued improvement in the fundamentals underpinning the U.S. housing market recovery." The index also revealed all but four states saw prices improve on a yearly basis: Delaware (-3.4 percent), Illinois (-2.7 percent), New Jersey (-0.9 percent), and Pennsylvania (-0.5 percent). Over a one-year period, Arizona experienced the biggest increase in prices: 20.2 percent. The remaining states in the top five also saw double-digit gains: Nevada (+15.3 percent), Idaho (+14.6 percent), California (+12.6 percent), and Hawaii (+12.5 percent). Out of the top 100 metropolitan areas as measured by population, only 16 experienced annual price declines in December. Phoenix led the metros with its 22.9 percent annual increase and was followed by another hard-hit metro, Riverside (+11.3 percent). The remaining three metros in the top five were Los Angeles (+9.8 percent), New York (+8.5 percent), and Washington, D.C. (+7.5 percent). | 71