Real Estate

US home price gauge rises at slowest pace in 6 years


Growth in US home prices again cooled off in January as budget-conscious buyers waited on the sidelines, handing a gauge of 20 major markets its weakest gain in more than six years.

S&P Corelogic Case-Shiller’s closely watched 20-city composite index, published on Tuesday, showed a 3.6 per cent increase in home prices year-over-year. That was down from a 4.1 per cent rate in December and marked the slowest pace since September 2012.

Across the US, home prices were up 4.3 per cent, the lowest reading since April 2015. Prices had gained 4.6 per cent year-over-year during the prior month. An index tracking prices in 10 cities gained 3.2 per cent.

The domestic housing market is coming off a lacklustre year in 2018. Rising mortgage rates, elevated property values and a limited number of listings discouraged prospective buyers, while homebuilders faced pressure from higher commodity prices and a labour shortage.

Buying activity has picked up this year, thanks in part to the Federal Reserve’s retreat from its prior rate-rise plans. Sales of previously owned homes surged 11.8 per cent in February when compared with the previous month. Mortgage rates sank from a peak of 4.95 per cent in November to 4.28 per cent by mid-March, the Case-Shiller report noted.

“Mortgage rates are as important as prices for many home buyers,” David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, said in a statement. “It remains to be seen if recent low mortgage rates and smaller price gains can sustain improved home sales.”

For homebuilders, market challenges continued to drag on construction last month. The US Commerce Department said Tuesday construction of single-family homes slipped to a one-and-a-half-year low, as housing starts fell 8.7 per cent month-on-month to a seasonally adjusted annual rate of 1.162m residential units. Data for January and December were revised upward.

Building permits, a measure of future building activity, were down 1.6 per cent to a rate of 1.296m units.

The downbeat set of housing data pushed homebuilder stocks lower. The Dow Jones Home Construction Index fell 1.3 per cent on Tuesday. Toll Brothers, DR Horton and Lennar were each down more than 1 per cent.

“We still see the challenges the housing market has been dealing with over the past several months such as price growth and labour constraint,” said John Pataky, executive vice-president at TIAA Bank.

“However, the picture in the housing market is not all negative,” he added. “If buyers decide to take decisive action in this period of flat rates and decelerating cost growth, we could see the market pick up as spring homebuying season gets under way.”

Also on Tuesday, the Conference Board said its consumer confidence survey in March dipped to 124.1 from 131.4, bucking expectations for a reading of 132.5.



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