Growth in US home prices continued to cool off in February, backing hopes that buyers will return to the market after feeling pressure from rising mortgage rates and a dearth of listings.
S&P Corelogic Case-Shiller’s national index on Tuesday showed a 4 per cent gain year-over-year, its weakest pace in about six and a half years and slower than the 4.2 per cent growth seen in January. An index tracking 10 major markets was up 2.6 per cent, while the 20-city composite index registered 3 per cent growth.
No members of the 20-city gauge posted double-digit growth in home prices, and just one city had a faster rate of price appreciation year-over-year compared with January. Prices grew at the strongest pace in Las Vegas, which posted a 9.7 per cent gain. A year earlier, Seattle claimed the largest gain at 12.7 per cent.
David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, noted that “the pace of increases for home prices continues to slow” after sales of existing single-family homes peaked in February 2018.
“Home sales drifted down over the last year except for a one-month pop in February 2019. Sales of new homes, housing starts, and residential investment had similar weak trajectories over the last year,” he said, adding that mortgage rates are now down one-half to three-quarters of a percentage point since late 2018.
A spike in interest rates and elevated home prices — driven in part by a limited number of homes on the market — kept potential buyers waiting on the sidelines last year. Home prices have since slowed their pace of growth. This, along with a decline in borrowing costs, has helped ease affordability concerns just in time for the spring selling season.
Homebuilders have expressed optimism that buying activity will pick up this year. US homebuilder sentiment improved to a six-month high in April amid robust demand for new homes and lower rates, according to the National Association of Home Builders. PulteGroup chief executive Ryan Marshall said last week the company was “generally encouraged” with buyers “steadily” returning to the market.
Meanwhile, the National Association of Realtors said Tuesday pending home sales were up 3.8 per cent in March versus the prior month, aided by the decline in mortgage rates.
“We are seeing a positive sentiment from consumers about home buying, as mortgage applications have been steadily increasing and mortgage rates are extremely favorable,” NAR chief economist Lawrence Yun.