Growth in home prices slows in August for 5th month in row

WASHINGTON — U.S. home-price gains slowed for the fifth-straight month in August as higher mortgage rates have lowered home sales.

The S&P CoreLogic CaseShiller 20-city home price index, released Tuesday, increased 5.5 percent in August compared with a year earlier, down from a 5.9 percent gain in the previous month.

The deceleration reflects a broader weakening in the nation’s housing market. Sales of existing homes have dropped for six straight months, and sales of new homes have fallen for the past four. Home-price increases have run ahead of wage gains for five years and appear to have left many would-be buyers on the sidelines.

Prices rose the most in Las Vegas, San Francisco and Seattle. But price gains have slowed compared with a year earlier in 14 of the 20 cities tracked.

The slowdown in housing shows little sign of becoming a broader crisis similar to what occurred in 2007. David Blitzer, chairman of the index committee at S&P Dow Jones, points out that mortgage defaults, which spiked in the housing bust, remain stable.

Higher borrowing costs have raised monthly payments for new buyers, on top of rising home prices. Some of the biggest increases in mortgage rates occurred in September and October and aren’t reflected in Tuesday’s data. That suggests that price gains will likely slow further in the coming months.

The average 30-year fixed mortgage ticked up to 4.86 percent last week, from 4.85 percent the previous week. A year ago, it stood at 3.94 percent.

“These challenges for buyers will continue to diminish affordability, taking a bite out of home sales and exert more downward pressure on home prices,” said Cheryl Young, senior economist at real estate data provider

Trulia.

Home prices in Las Vegas jumped 13.9 percent from a year ago and rose 10.6 percent in San Francisco. Seattle’s home values increased 9.6 percent, the first time its gains have fallen below double-digits since December 2015.

The slowest increases were in Washington, D.C., and New York City, with 2.8 percent each, followed by Chicago with 2.9 percent.

Other recent reports showed purchases of previously owned U.S. homes fell

in September to the weakest pace in three years, while new-home sales tumbled to the lowest level since December 2016. Housing starts also declined in September after disruptions from Hurricane Florence.

“Following reports that home sales are flat to down, price gains are beginning to moderate,” Blitzer said in a statement. “There are no signs that the current weakness will become a repeat of the crisis, however.”

Also Tuesday, the Census Bureau reported that the

homeownership rate in the U.S. increased in the third quarter, a sign that first-time buyers may be seeing the cool-down in housing prices as a buying opportunity.

The share was 64.4 percent, according to the report. It was up from 64.3 percent in the previous three months and 63.9 percent a year earlier.

With the fevered price gains of the past six years slowing, more buyers can take their time to find the best deal without the pressure of bidding wars. The recent

jump in mortgage rates has also taken the edge off demand. With such a large population of Americans under age 45, the homeownership rate can still rise as more renters make their first purchases, said Tian Liu, chief economist at Genworth Mortgage Insurance, before the announcement.

“There is a benefit to potential first-time buyers in the market today: There is less competition for available homes,” Liu said in a phone interview. “Now, they may be able to afford —

through slower home-price growth — a more desirable home than before.”

For Americans under age 35, the homeownership rate rose to 36.8 percent in the third quarter from 35.6 percent a year earlier. The share for the 35-to-45 age group was 59.5 percent, up from 59.3 percent.