WASHINGTON – U.S. home price gains cooled in February from the previous year for the third month in a row, as harsh winter weather and high buying costs have slowed sales.
The Standard & Poor’s/Case-Shiller 20-city home price index rose 12.9 per cent in February compared with 12 months earlier. While healthy, that is down from a 13.2 per cent gain in January.
And home prices fell in 13 of the 20 cities in February compared with the previous month. The index is not adjusted for seasonal variations, so those declines partly reflect weaker sales in the winter.
In addition to bad weather, sales have been held back by a limited supply of available homes, which has forced potential buyers to bid up prices. That’s caused prices to increase even as sales have slowed. Sales of existing homes fell to their lowest level in 20 months in March.
With sales slowing, many economists forecast that price gains will keep dropping this year into the mid-single digits.
Higher prices may also be discouraging investors from buying homes, contributing to slower sales. Investors accounted for 17 per cent of sales in March, according to the National Association of Realtors, down from 21 per cent in February.
“The housing market is showing signs of slowing, but this was expected and is part of a broader return to normal,” said Stan Humphries, chief economist at real estate data provider Zillow.
Prices in Las Vegas dipped 0.1 per cent in February from the previous month, the city’s first monthly decline in nearly two years. And home prices fell 1.6 per cent in Cleveland and 0.7 per cent in Tampa, Florida. Both monthly drops were the largest for those two cities since January 2012.
Las Vegas still posted the biggest 12-month gain, with an increase of 23.1 per cent. But that’s down from 24.9 per cent in January. Many investors had snapped up homes in Las Vegas after prices plunged in the housing bust, causing sharp price gains.
Home sales and construction started recovering about two years ago after being hammered by the housing bust and Great Recession. But a jump in mortgage rates last spring caused sales of existing homes to start falling in the summer.
Sales have now fallen in seven of the past eight months. But the sales decline in March was small and many economists said it showed that existing-home sales had likely bottomed out.
Contracts to buy homes posted a healthy gain last month, the Realtors’ group said yesterday. Signed contracts typically result in sales one to two months later, so the increase points to higher sales in the coming months.
New home sales, meanwhile, plunged 14.5 per cent in March to the slowest pace in eight months, according to a government report last week. A jump in prices contributed to the decline.
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 February figures are the latest available.