Some of the hottest housing markets are cooling off
By Christopher S. Rugaber
AP Economics Writer
WASHINGTON (AP) — U.S. home prices rose in April from a year ago at the slowest pace in 13 months, reflecting a recent drop-off in sales.
The Standard & Poor’s/Case-Shiller 20-city home price index rose 10.8 percent in April from 12 months earlier. That’s a healthy gain, but down from 12.4 percent in the previous month and the smallest since March 2013.
Annual price gains slowed in 19 of the 20 cities. Only Boston saw price increases accelerate.
Home sales have slowed since last summer as higher mortgage rates and rising prices and have made it harder for would-be buyers to afford a home. Sales of existing homes in May were 5 percent lower than 12 months earlier.
Prices rose 1.1 percent in April compared with March, though that gain likely reflected seasonal patterns. Home prices typically rise during the spring buying season.
Some of the hottest housing markets in the past two years are starting to cool off. Las Vegas, Los Angeles, Phoenix, San Diego and San Francisco reported annual price gains above 30 percent last year, according to Case-Shiller. In April, their price increases were all below 20 percent.
Home sales and construction started recovering in 2012 from the Great Recession. But a sharp jump in mortgage rates last spring caused sales of existing homes to decline that summer. Harsh winter weather also dragged down purchases.
Recently, however, there have been signs that the housing market could be stabilizing.
Mortgage rates have declined this year. The average rate on a 30-year fixed mortgage was 4.17 percent last week, according to mortgage buyer Freddie Mac. That’s up from 3.9 percent a year ago but down from 4.5 percent at the beginning of the year.
Lower mortgage rates and the slowdown in price gains may be helping sales. Purchases of existing homes rose 4.9 percent in May to a seasonally adjusted annual rate of 4.89 million, the National Association of Realtors said Monday. That’s the biggest one-month gain in nearly three years.
A rebound in home sales, if sustained, could provide a critical boost to the economy. Rising home sales mean more commissions for Realtors and greater sales of furniture, appliances and garden supplies.
David Blitzer, chairman of the S&P’s index committee, said several trends could push home sales higher in the coming months, including lower mortgage rates and steady job gains.
But first-time home buyers are still having trouble qualifying for loans, Blitzer said, partly because of tight credit standards at many banks. First-time buyers made up just 27 percent of home sales in May, near record lows and below the typical level of about 40 percent.
The Case-Shiller index covers roughly half of U.S. homes. The index measures prices compared with those in January 2000 and creates a three-month moving average. The March figures are the latest available.
