Home prices make gains above pre-recession peaks

Dallas was recently the first city to surpass its peak home price levels.

Tight inventory levels maintain a seller's market as home prices surge above previously established peak levels in a pair of cities, possibly giving a boost to local commercial real estate companies.

The New York Times reported a 12.2 percent gain in May in national home prices according to the S&P/Case-Shiller Home Price Index that monitors about half of all single-family home prices. Economists were predicting a 12.4 percent gain, as inventory constraints are expected to get worse before getting better. Current inventory levels are around 2.2 months, according to YCharts.

"Home prices continue to rise across the country because of inventory shortages," Erik Johnson, senior U.S. economist for IHS Global Insight, told the Denver Business Journal. "Construction of single-family homes has been depressed since late 2007, while the U.S. population has increased by more than 12 million in that time. Since underlying demand is, by our estimate, running at a rate nearly twice that of housing completions, the shortages are likely to get larger before getting smaller. This means that home price gains in most cities and state are likely to remain strong for some time."

Regional growth
​Svenja Gudell, a senior economist at Zillow, said the weakening number of foreclosed and distressed properties for sale are helping put upward pressure on home price data despite most major markets still sitting 25 percent below their peak levels. However, the cities of Denver and Dallas both surpassed their previous peaks by about 1 percent in May. 

Dallas experienced a 7.6 percent gain in home prices in May year-over-year, while Denver saw a 9.7 percent yearly gain in home prices – the 17th consecutive gain of its kind. Currently, home prices in Denver are 40.98 percent higher than the S&P/Case-Shiller benchmark levels established in January 2000.

The Dallas Morning News reported a 19 percent gain in total pre-owned home sales in the Dallas-area, coupled with a 13 percent hike to the median home price – rising to $185,820 – giving a boost to Dallas resident's net worth. The boost could increase consumer spending in those regions, shoring up the commercial fundamentals for retail businesses and property managers.  According to the Cas-Shiller report, Dallas and Denver represent the first time a city has exceeded its previous peak levels.

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