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Home Price Appreciation Continues to Slow

Phil Hall
May 28, 2019
Photo credit: Getty Images/CharlieAJA

Home price gains continued to slow, according to the latest data from the S&P CoreLogic Case-Shiller Indices.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index recorded a 3.7 percent annual gain in March, down from 3.9 percent in February. The 10-City Composite’s annual increase of 2.3 percent was down from 2.5 percent in the previous month and the 20-City Composite’s 2.7 percent year-over-year gain was lower than the three percent gain in the previous month.
Before the seasonal adjustment, the National Index posted a month-over-month increase of 0.6 percent in March while both the 10-City and 20-City Composites saw 0.7 percent increases. After the seasonal adjustment, the National Index recorded a 0.3 percent month-over-month increase in March and the 10-City and 20-City Composites both posted 0.1 percent month-over-month increases. In March, 19 of 20 cities reported increases before the seasonal adjustment and 14 of 20 cities reported increases after the seasonal adjustment.
“The patterns seen in the last year or more continue: year-over-year price gains in most cities are consistently shrinking,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “Double-digit annual gains have vanished. The largest annual gain was 8.2 percent in Las Vegas; one year ago, Seattle had a 13 percent gain. In this report, Seattle prices are up only 1.6 percent.”
Blitzer also observed, “Given the broader economic picture, housing should be doing better. Mortgage rates are at four percent for a 30-year fixed rate loan, unemployment is close to a 50-year low, low inflation and moderate increases in real incomes would be expected to support a strong housing market. Measures of household debt service do not reveal any problems and consumer sentiment surveys are upbeat. The difficulty facing housing may be too-high price increases. At the currently lower pace of home price increases, prices are rising almost twice as fast as inflation: in the last 12 months, the S&P Corelogic Case-Shiller National Index is up 3.7 percent, double the 1.9 percent inflation rate.”
Separately, the Federal Housing Finance Agency (FHFA) reported that home prices rose 1.1 percent in the first quarter this year, up 5.1 percent from the first quarter of 2018. The agency also reported its seasonally adjusted monthly index for March was up 0.1 percent from February.
Home prices rose in all 50 states and the District of Columbia between the first quarters of 2018 and 2019, most notably in Idaho with a 13.4 percent increase, while Maryland had the smallest year-over-year appreciation with 0.5 percent. Boise City, Idaho, had the greatest metro home price increase on a year-over-year basis with 16 percent, while the weakest prices were in Honolulu with a 4.5 percent year-over-year decline.
In another data report, First American Financial Corp. found real house prices decreased 0.9 percent between February and March and were also down 0.4 percent in March from one year earlier. At the same time, consumer house-buying power increased 1.5 percent between February and March and increased 5.2 percent year over year, while average household income in March is up 3 percent since March 2018 and 56 percent since January 2000. However, while unadjusted house prices are now 2.6 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 40 percent below their 2006 housing boom peak.
“What began as a modest shift toward a buyers’ market in six cities last month has expanded into a national shift in affordability,” said Mark Fleming, chief economist at First American. “The shift is a departure from the long-term trend in the Real House Price Index (RHPI), which had been steadily increasing throughout the rising mortgage rate environment that began in 2017 and continued until late 2018. Rising mortgage rates caused consumer house-buying power to decline at the same time as tight supply pushed house prices up rapidly. In March, two main components of the RHPI swung in favor of increased affordability – continued strong household income growth and declining mortgage rates. Nationally, affordability improved on a year-over-year basis for the first time since 2016.”

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