Northwest Arkansas Democrat-Gazette
Home prices up 6.3 percent
Rise pushes cost of starter houses to pre-recession levels.
WASHINGTON — U.S. home prices climbed 6.3 percent in June from a year earlier, as affordability is becoming a greater obstacle for would-be buyers. The S&P CoreLogic CaseShiller 20-city home price index rose at a slightly slower pace than the 6.5 percent annual gain in May from a year earlier. But home values are increasing at more than double the pace of average wage growth, weighing down property sales despite the robust job growth. While a strong job market and elevated consumer optimism have continued to provide support for home sales in major cities, hurdles include mortgage rates near a seven-year high, as well as a dearth of listings. Wage gains also remain tepid. The figures reinforce other recent signs that the residential real estate market is softening. The National Association of Realtors said purchases of previously owned homes fell to a twoyear low in July amid supply constraints and escalating prices. Government data showed a similar trend in the new-home market, with sales dropping to a nine-month low. Despite the sales slowdown, inventories remain tight and that has meant that buyers — especially those searching for homes worth less than $250,000 — have scant options. Home prices in three metro areas have increased by double digits in the past year: Las Vegas (13 percent), Seattle (12.8 percent) and San Francisco (10.7 percent). While all 20 cities posted advances from a year earlier, New York was the only metropolitan area to see a drop from the previous month, as changes to tax deductions hamper demand. After seasonal adjustment, Las Vegas had the biggest month-over-month rise at 1.4 percent, followed by Cleveland, Detroit and Minneapolis, each with a 1 percent increase. Dallas had the smallest gain at 0.4 percent.
● “Sellers, for now and for the foreseeable future, are still in control in this market,” said Aaron Terrazas, a senior economist at the real estate company Zillow. Starter homes are now more costly to purchase than at any time since 2008, when the last boom came to a crashing halt. In the second quarter, first-time buyers needed almost 23 percent of their income to afford a typical entrylevel home, up from 21 percent a year earlier, according to an analysis by the National Association of Realtors. “When prices go up at the entry level, that’s where the affordability issue is most acute,” Charles Dougherty, a Wells Fargo & Co. economist, said in a phone interview. “People are hesitant to stretch the amount they’re willing to pay.” The most expensive U.S. markets include San Francisco and New York, where the median household needed about 65 percent of its income to buy a home in the second quarter, according to an analysis from Trulia.