Gains in housing prices slowing
20-city list shows market braking
Home-price gains in 20 U.S. cities grew in July at the slowest pace in almost a year, a sign demand is increasingly bumping up against affordability constraints as climbing mortgage rates discourage a growing number of prospective buyers.
July marked the fourth consecutive month that annual price gains in the 20-city index decelerated, according to S&P CoreLogic Case-Shiller data released Tuesday. That’s in sync with other reports indicating housing is stalling as buyers shy away from higher prices, in addition to a lack of choice among affordable properties. At the same time, steady hiring and elevated confidence are supporting demand.
The Case-Shiller index increased 5.9 percent in July compared with a year earlier, down from a 6.4 percent annual gain the previous month.
Prospective buyers — especially younger ones or those purchasing for the first time — may get further relief as home-price appreciation moderates, although it is still outpacing wage growth. On the flip side, price gains keep adding to homeowner equity for others.
The report showed four cities recorded monthly price declines in July, led by New York, followed by Boston, Chicago and Dallas. Thirteen showed gains, while three were unchanged.
“The slowing is widespread,” David Blitzer, chairman of the index committee, said in a statement. “Fifteen of 20 cities saw smaller monthly increases in July 2018 than in July 2017.”
All 20 cities in the index showed year-over-year gains. Las Vegas, Seattle and San Francisco reported the biggest annual gains, with all three cities seeing doubledigit increases. Yet in 15 of 20 cities, price gains were smaller in July than in the same month a year earlier.
Home prices are rising at twice the rate of wages, which has likely contributed to a cooling in the market this year. Sales of existing homes have dropped 1.5 percent in the past 12 months. Mortgage rates last week reached their highest level since May.
“Coupled with mortgage rate increases, higher prices are stifling home sales as more buyers are priced out of the market,” Danielle Hale, chief economist at Realtor. com, said Tuesday after the report was released.
The average 30-year mortgage rate rose to 4.65 percent last week, according to mortgage giant Freddie Mac. That is up from 3.83 percent a year ago.
Any rate below 5 percent is very low by historical standards, but many homeowners locked in rates below 4 percent in the past five years. That means they would have to accept a higher rate to buy a new home. Plenty of homeowners are choosing to remodel their current homes instead.
The number of homes for sale remains limited, which has sparked bidding wars in many cities. However, the supply crunch may be easing: There were 1.92 million homes for sale at the end of August, up from just 1.87 million a year ago.
Information for this article was contributed by Shobhana Chandra of Bloomberg News; and by Christopher Rugaber of The Associated Press.