WASHINGTON – U.S. home prices rose at a slightly slower pace in the 12 months that ended in March, a sign that weak sales have begun to restrain the housing market’s sharp price gains.
Data provider CoreLogic says prices rose 11.1 per cent in March compared with March 2013. Though a sizable increase, that was down a bit from February’s 12.2 per cent year-over-year increase.
On a month-to-month basis, prices in March rose 1.4 per cent from February. But CoreLogic’s month-to-month figures aren’t adjusted for seasonal patterns, such as warmer spring weather.
Home sales and construction have faltered since last fall, slowing the economy. A harsh winter, higher buying costs and a limited supply of available homes have discouraged many potential buyers. Existing-home sales in March reached their lowest level in 20 months.
Some signs suggest that buying might be picking up a bit as the spring season gets underway. Signed contracts to buy homes rose in March for the first time in nine months, the National Association of Realtors said last week.
Even so, economists forecast that sales of existing homes will barely rise this year from 2013’s pace of 5.1 million. Sluggish sales, in turn, will slow annual price gains this year to roughly 5 per cent or 6 per cent, economists predict. CoreLogic forecasts that prices will increase just 6.7 per cent in the 12 months that will end next March.
Higher prices typically encourage some homeowners to sell, yet the number of homes on the market remains low. CoreLogic’s chief economist, Mark Fleming, said many homeowners might be reluctant to sell because they’ve locked in low mortgage rates and are hesitant to buy a home with a higher-rate mortgage.
The Federal Reserve’s bond-buying program helped reduce the average rate on a 30-year fixed mortgage to as low as 3.3 per cent in early 2013. The average is now about 4.3 per cent, according to mortgage buyer Freddie Mac.
Fleming calculates that about a third of homeowners with mortgages are paying rates below 4 per cent. An additional 15 per cent are paying around the current average of 4.3 per cent. That means roughly half of homeowners with mortgages are paying rates at or below the current level — roughly double the percentage of a year ago.
Home prices in California have jumped 17.2 per cent from a year ago, CoreLogic said. Nevada, at 15.5 per cent, has posted the second-largest gain, followed by Georgia, at 12.4 per cent; Hawaii, 12.3 per cent; and Oregon, 12.2 per cent.
The Riverside-San Bernardino, California, metropolitan area reported the largest price gain over the past 12 months: 20.9 per cent. It was followed by Los Angeles-Long Beach, with a 17.1 per cent gain; Atlanta-Sandy Springs, 14.1 per cent; Houston-Sugar Land, at 13.7 per cent; and Chicago-Naperville, 11.3 per cent.
Home sales and construction began 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.