WASHINGTON – U.S. home prices continued their steady upward march in February as buyers competed for a limited number of available properties.
The Standard & Poor’s/Case-Shiller 20-city home price index rose 5.4 per cent that month compared with a year earlier, according to a report released Tuesday. That’s down slightly from January’s 5.7 per cent rise.
Prices are rising even as sales have levelled off in recent months. The number of homes for sale last month was 1.5 per cent lower than a year earlier. That’s pushed buyers to act quickly, with homes on the market just 47 days in March, according to the National Association of Realtors.
Svenja Gudell, chief economist at real estate website Zillow, said the problem is particularly acute for first-time buyers and those looking at mid-level homes.
“Heading into spring, buyers looking for the most expensive homes will find somewhat softening prices, a larger selection of homes to choose from and more limited competition,” she said. “Entry-level and mid-market buyers – typically the housing market’s bread and butter – are likely to face stiff competition, rapidly rising prices and very limited inventory. The patience of many buyers will be tested in coming months.”
The highest year-over-year gains were in Portland, Oregon; Denver; and Seattle, three cities with rapid job gains, driven by burgeoning software and technology companies.
Home prices jumped 11.9 per cent in February from a year earlier in Portland, 11 per cent in Seattle and 9.7 per cent in Denver.
Despite low mortgage rates and steady job gains, Americans have been cautious about buying homes this year. Sales of existing homes rose 5.1 per cent in March to an annual pace of 5.33 million, partially rebounding from February’s steep fall. But purchases were just 1.5 per cent higher than a year earlier.
And new home sales fell 1.5 per cent in March to a seasonally adjusted annual rate of 511,000, the government said Monday. That’s below the long-term rate of 650,000 a year.
The lack of available homes can be self-perpetuating problem. Many homeowners don’t list their houses for sale if they see few properties that they can buy. Others do not have enough equity in their homes to afford a down payment on a purchase.
New home building hasn’t yet filled the gap. Home construction fell 8.8 per cent in March, the biggest drop in five months, to an annual pace of 1.09 million single-family homes and apartments.
Rising prices may make it harder for many Americans to buy a house, though that is partly offset by low mortgage rates. The average rate nationwide on a 30-year mortgage was 3.59 per cent last week, according to mortgage buyer Freddie Mac.
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.