Slowdown in Home Prices Represents Shift in Market Fundamentals
U.S. existing-home prices continued to rise in July, according to a recent report from the S&P Dow Jones Indices, although at a much slower pace than the month before, with the quick cool-down surprising market analysts.
The S&P/Case-Shiller Home Price Index registered existing-home prices rising just 0.5 percent from June across the country, down from a 0.9 percent increase in June. Compared with July 2013, prices have risen 5.6 percent nationally.
The Case-Shiller 20-city index, a measure of home prices in the 20 largest metropolitan areas, increased by 0.6 percent in July, and grew by 6.7 percent from the previous year. Of those 20 cities New York led the pack in price growth with a 1.1 percent increase from June. Detroit followed with a 0.9 percent monthly increase, and both Dallas and Miami posted monthly price growth of 0.8 percent. At the bottom was San Francisco, where prices actually fell 0.4 percent in July, the first decline there in 2014. Others at the bottom included Washington D.C. with a price appreciation of just 0.1 percent and Boston where price grew by 0.2 percent.
“The broad-based deceleration in home prices continued in the most recent data,” said David M.
Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices in a statement. “... The slower pace of home price appreciation is consistent with most of the other housing data on housing starts and home sales.”
Blitzer did point out that there is still a silver lining. “While the year-over-year figures are trending downward, home prices are still rising month-to-month although at a slower rate than what we are used to seeing over the past couple of years. The National Index rose 0.5%, its seventh consecutive increase.”
The slowdown may also indicate that the housing market is making a key shift in its recovery.
“The housing market has been giving us a lot of mixed signals lately. New home sales are up big, but existing home sales are down. Case-Shiller and other housing indices continue to show a general slowdown in home price appreciation, even as some local markets remain very hot. Inventory is up, but sales volume is down,” said Zillow chief economist Stan Humphries.
“What all of this is really telling us is that the housing market we’re beginning to see emerge from the ashes of the recession is one that is finally transitioning away from being fueled by internal factors like low mortgage interest rates, low inventory and low prices,” he added. “Instead, it is increasingly being fueled by more traditional outside factors like wage growth, an improving job market and household formations.”
A return to those more traditional fundamentals is likely a good sign for a long-term recovery, even if it means less profit for sellers in the short –term and a slower return to positive equity for the remaining 10 percent of underwater American homeowners.