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Are Home Prices Decelerating?

home pricesU.S. home prices grew at 6.4 percent in April compared with the same period last year according to the S&P CoreLogic Case-Shiller Home Price Index (HPI) released on Tuesday. The growth, however, was slightly down from 6.5 percent recorded in March. The index, which comprises of a national index covering all nine U.S. Census divisions, the 10-City Composite and the 20-City Composite indices found that on a month over month basis, the index posted a gain of 1 percent in April.

Seattle, Las Vegas, and San Francisco kept up their lead for the second consecutive month reporting the highest year-over-year gains in home prices among 20 cities. In April Seattle registered a growth of 13.1 percent in home prices, followed by Las Vegas with 12.7 percent, and San Francisco with 10.9 percent growth. The data indicated that nine of the 20 cities on the index reported greater prices increases in the year ending April 2018, compared with the year ending March 2018.

“The favorable economy and moderate mortgage rates both support recent gains in housing. One factor pushing prices up is the continued low supply of homes for sale,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The months-supply is currently 4.3 months, up from levels below four months earlier in the year, but still low.”

Supply concerns, in fact, have been one of the key reasons that are pulling home prices up this year, especially for lower-priced homes according to Tendayi Kapfidze, Chief Economist LendingTree. “Sales for homes under $100,000 were down 18 percent year over year in May and those between $100,000 and $250,000 were down 7 percent,” Kapfidze said. “Prices have softened and may be indicating that rate rises are having an impact on transaction prices.”

According to Danielle Hale, Chief Economist at Realtor.com home supply in the three cities that have shown a maximum rise in home prices is playing out differently. “Inventory remains limited and declining in Las Vegas and San Francisco, while price increases appear to be bringing more inventory to the market in Seattle,” she observed.  

Other factors that could impact home prices in the long run also include rising tariffs. “We see tariffs placed on Canadian lumber and other imported products as adding fuel to already high home price growth,” said Tian Liu, Chief Economist at Genworth Mortgage Insurance. “These new tariffs may force homebuilders to hold tight on price amid uncertainties about rising material costs.”

About Author: Radhika Ojha

Radhika Ojha is an independent writer and editor. A former Online Editor and currently a reporter for MReport, she is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Houston, Texas.
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