Home prices fall slightly, but up for the year
According to the S&P/Case-Shiller Home Price Index released today, American home prices fell in December for the second consecutive month, but only by 0.01 percent compared to November after a similar decline the month prior. Home prices year-over-year across all nine U.S. Census divisions rose 11.3 percent, pointing to a rough winter, but overall, an improving sector.
David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, said the Index ended its best year since 2005, “However, gains are slowing from month-to-month and the strongest part of the recovery in home values may be over. Year-over-year values for the two monthly Composites weakened and the quarterly National Index barely improved.”
Zillow Chief Economist Dr. Stan Humphries said in a statement, “December capped an undeniably great year in housing in 2013, though it definitely was not as strong as today’s Case-Shiller data indicates. Less distorted indices show national appreciation ending the year at roughly half the rate today’s data shows, which is still nothing to sneeze at.”
Dr. Humphries added, “But toward the end of the year, the market’s robust bounce off the bottom began to inevitably tail off, and that slowing momentum has carried over into the beginning of this year. After a long winter, the market is gearing up for a spring home shopping season that should be a bit smoother for buyers, with less investor competition and marginally more inventory. Looking further ahead, the market should continue its slow march back to normal, as annual appreciation rates fall to more sustainable levels around 3 percent, mortgage interest rates climb to levels closer to historic norms and negative equity continues to recede.”
Case-Shiller on track with other indices
The slip in home prices for December was more like stagnation than a decline, and it matches similar indices reporting a slow down, including the National Association of Realtors’ Existing Home Sales report, showing a dip in sales.
Average home prices nationally are back at mid-2004 levels, but they are still roughly 20 percent off of their peak in 2006. The top three performing cities of 2013 year-over-year were Las Vegas (25.5 percent), followed by Los Angeles (20.3 percent) and San Francisco (22.6 percent) – way to go, West Coast! Meanwhile, most of the Sun Belt experienced lower year-over-year rates in December than in November.
“Recent economic reports suggest a bleaker picture for housing,” Blitzer noted. “Some of the weakness reflects the cold
weather in much of the country. However, higher home prices and mortgage rates are taking a toll on affordability. Mortgage default rates, as shown by the S&P/Experian Consumer Credit Default Index, are back to their pre-crisis levels but bank lending standards remain strict.”