CHICAGO—The Chicago metropolitan area just recorded the greatest year-over-year gain in its home prices since November 2005, according to the latest S&P/Case-Shiller US National Home Price Index, just published by the S&P Dow Jones Indices. Since last year, the data show that Chicago-area prices increased by 9.7%. This was, however, still below S&P's 20-city composite of 13.3%, another indication that Chicago, whatever improvement it has experienced, lags behind much of the nation.
“The second and third quarters of 2013 were very good for home prices,” says David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “The National Index,” which is separate from the 20-city composite, “is up 11.2% year-over-year, the strongest figure since the boom peaked in 2006.”
But although the raw numbers look good, analysts did raise some concerns. The huge growth seen in many western cities, such as San Francisco and Los Angeles, which had price growth of 25.7% and 21. 8%, respectively, has some worried that another bubble is starting to develop. Furthermore, according to Blitzer, “existing home sales weakened in the most recent report, home construction remains far below the boom levels of six or seven years ago and interest rates are expected to be higher a year from now.”
Other Midwestern cities included in the study were Cleveland, Detroit and Minneapolis. Cleveland has lagged behind other American cities for quite some time and continues to recover slowly. Its prices increased only 5.0% over the past year, the slowest rate of increase among the metro areas studied, with the exception of New York. And although Detroit posted a 17.2% gain, its prices still remain far below other cities. In fact, Detroit remains the only city below its January 2000 index level.The much healthier Minneapolis market scored in the double-digits as well, with a gain of 10.1%.
“Housing continues to emerge from the financial crisis: the proportion of homes in foreclosure is declining and consumers' balance sheets are strengthening,” says Blitzer. “The longer run question is whether household formation continues to recover and if home ownership will return to the peak levels seen in 2004.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
