Home Price Appreciation Continued to Slow in January

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U.S. home prices continued to rise as a whole in January, but at a slower pace than seen earlier in 2018, the S&P CoreLogic Case-Shiller home price index shows.

Home prices increased 0.2% on a seasonally adjusted basis in January compared with December and were up 4.3% compared with January 2018.

The yearly increase is where the slowdown really shows up: Annual home price growth was at 4.6% in December.

Month-over-month, the index’s 10-city composite (measuring prices in the top 10 largest metros) was flat, while the 20-city composite posted 0.1% increase.

Without seasonal adjustment, home prices fell 0.2% nationally, month-over-month. The 10-city composite decreased 0.3% while the 20-city composite decreased 0.2%.

Las Vegas, Phoenix and Minneapolis reported the highest year-over-year gains among the 20 cities. They were up 10.5%, 7.5% and 5.1%, respectively.

Only one of the 20 cities reported greater price increases in the year ending January 2019 versus the year ended December 2018.

“Home price gains continue to shrink,” says David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in a statement. “In the year to January, the S&P CoreLogic Case-Shiller National Index rose 4.3 percent, two percentage points slower than its pace in January 2018. The last time it advanced this slowly was April 2015.

“In 16 of the 20 cities tracked, price gains were smaller in January 2019 than in January 2018,” Blitzer says. “Only Phoenix saw any appreciable acceleration. Some cities where prices surged in 2017-2018 now face much smaller increases: in Seattle, annual price gains dropped from 12.8 percent to 4.1 percent from January 2018 to January 2019. San Francisco saw annual price increases shrink from 10.2 percent to 1.8 percent over the same time period.”

The flattening of home price appreciation is good news for home buyers and, in particular, first-time home buyers – as is the recent drop in mortgage rates, which, as Blitzer notes, “are as important as prices for many home buyers.”

“Mortgage rates climbed from 3.95 percent in January 2018 to a peak of 4.95 percent in November 2018,” Blitzer says. “Since then, rates have dropped to 4.28 percent as of mid-March. Sales of existing single-family homes slid gently downward from the fourth quarter of 2017 until January of this year before jumping higher in February. Home sales annual rate dropped from 5 million units in February 2018 to 4.36 million units in January before popping to 4.94 in February. It remains to be seen if recent low mortgage rates and smaller price gains can sustain improved home sales.”

January represented the tenth consecutive month that home price growth slowed in the U.S.

It is now at its lowest level of growth since September 2015, according to CoreLogic.

“January kicked the new year off with yet another month of slowing price growth,” says Ralph B. McLaughlin, deputy chief economist and executive of research and insights for CoreLogic, in a separate statement. “This is a strong signal that the home buying season this spring will look quite different than in recent years. While sellers still hold a good set of cards, buyers in some high-price coastal markets have recently drawn aces with rising inventory, increasing price cuts and longer time on the market, helping them win some hands. As a result, we can expect buyers and sellers to be a little better matched at the negotiating table this spring.” 

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