WASHINGTON – U.S. home prices rose at a modest pace in November, held back by weaker sales and a limited number of houses for sale.
The Standard & Poor’s/Case-Shiller 20-city home price index, released Tuesday, increased 4.3 per cent in November from 12 months earlier. That’s down slightly from a 4.5 per cent pace in October. Home price gains have decelerated for 12 straight months.
The slowdown in price increases should help boost sales this year. Home values rose at a double-digit pace in early 2014, making many homes unaffordable. Sales of existing homes fell 3.1 per cent to 4.93 million last year. First-time buyers in particular were priced out of many neighbourhoods and accounted for a historically low proportion of sales last year.
Economists are hopeful that home sales and construction will rebound this year, partly because price gains are returning to levels consistent with a stable housing market. Lower mortgage rates, healthy hiring, and lower down payment requirements from mortgage giants Fannie Mae and Freddie Mac may also spur sales.
“The housing market is heading in the right direction,” said Stan Humphries, chief economist at real estate data provider Zillow. “This year ought to be much more friendly for buyers in general. More inventory … slowing price gains and continued low mortgage rates will all contribute to buyers feeling more comfortable this year than in previous years.”
Home values have risen for lower-priced homes, Humphries said, which gives those homeowners more equity and should encourage more of them to sell. That should bring more modest-priced homes on the market that are affordable for first-time buyers, he added.
Home prices in all 20 cities increased over the past 12 months, the Case-Shiller index showed. San Francisco’s increase of 8.9 per cent was the largest, followed by Miami at 8.6 per cent. Cleveland posted the smallest gain, at 0.6 per cent.
The 20-city index fell 0.2 per cent in November from October. The index’s monthly price changes aren’t adjusted for seasonal variations, such as slower home buying in winter. Eleven cities reported price gains in November from the previous month, led by Tampa’s 0.8 per cent gain. Chicago’s price drop of 1.1 per cent was the largest.
Other recent data on housing suggests that sales and construction are on the upswing. While sales of existing homes fell in 2014, they picked up in December, increasing 2.4 per cent from the previous month to a seasonally adjusted annual pace of 5.04 million. Many economists forecast sales will rise to about 5.2 million this year.
Mortgage rates have fallen for four straight weeks and the average rate on a 30-year fixed mortgage is just 3.63 per cent. That makes it easier for would-be buyers to purchase a home. It has also prompted a spike of refinancing applications that could enable many Americans to lower their monthly mortgage payments, freeing up cash to spend or save.
Home construction, meanwhile, jumped 4.4 per cent last month to an annual rate of 1.09 million. Builders began construction on 1.01 million new houses and apartments in 2014, the most in nine years and 8.8 per cent more than in 2013.
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 November figures are the latest available.