Home price gains lose steam

Home prices are still climbing nationwide, but the rate of those increases appears to be losing steam, according to new data out Tuesday.

The latest edition of the S&P/Case-Shiller Home Price Index found that home prices nationwide climbed just 0.9 percent in June. And that comes after another slowdown in May, when prices climbed just 1.1 percent.

ADVERTISEMENT
In the last 12 months, home prices nationwide have climbed 8.1 percent, down from 9.3 percent reported in June. All 20 cities tracked by the index are now reporting smaller year-over-year gains than they were a month earlier.

The slower pace for home price jumps suggests that the housing market might be returning to a more normal state, after the dramatic drops and subsequently dramatic spikes that characterized the housing crisis and comeback.

“For the first time since February 2008, all cities showed lower annual rates than the previous month. Other housing indicators — starts, existing home sales and builders’ sentiment — are positive,” said David Blitzer, chairman of the index committee behind the report. “Taken together, these point to a more normal housing sector.”

All 20 cities tracked by the index reported increases for the third month in a row, and five cities did report larger gains in June than in May. Currently, Detroit is the only city that has yet to return to home price levels seen in 2000.

However, there is some reason for concern, given that price gains are showing signs of slowing even as mortgage rates continue to hover near record lows. The Federal Reserve has indicated it is eyeing a rate increase sometime in the next year or so, the first of its kind since the crisis began. The exit from the long period of near-zero borrowing costs will drive up mortgage rates, which in turn will take another bit out of home price increases.

In a separate report, the Federal Housing Finance Agency (FHFA) reported Tuesday that home prices were up 0.4 percent in June, bolstering the notion that the rapid gains for home prices are beginning to disappear. In years following the collapse, home prices typically saw rapid rates of increase, especially during the spring buying season. But 2014 appears to break from that pattern.

“The extraordinary price appreciation observed over the last few spring seasons was not evident in the second quarter of this year.  However, house price appreciation for the nation as a whole remained positive,” said FHFA principal economist Andrew Leventis.