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Running Out of Gas

homesThe latest S&PCoreLogic Case-Shiller Indices [1], feature a rarity these days. For the first time in a year, monthly price gains failed to crest the 6 percent mark.

They just missed. According to the indices, price gains in August topped out at 5.8 percent, slightly down from the flat 6 percent posted in July. And while it's the first sub-6 percent month in a while, August continued a downward trend in home price growth.

“This is the 5th consecutive month of decelerating home price growth, driving the index down to its lowest level since July 2017,” said Cheryl Young, senior economist at Trulia [2]. “These numbers pad the growing set of indicators that the housing market is slackening: housing inventory is rising slightly for the first time in years, price cuts on home listings are on the rise and home sales are slowing.”

Meanwhile, Young said, mortgage rates are hovering around seven-year highs. This, she said, gives “additional pause to potential home buyers as affordability continues to decline,” adding that weakening demand “will continue to exert downward pressure on home prices.”

Still, home prices did continue to rise across the country over the last 12 months. The indices' 20-City Composite posted a 5.5 percent year-over-year gain, which was down from 5.9 percent in the previous month's 12-month lookback.

Las Vegas, with a 13.9 percent, posted the biggest year-over-year price increases. San Francisco and Seattle, with 10.6 and 9.6 percent, respectively, followed close behind.

Month-over-month, the indices' 10- and 20-month composites did not report any gains for August.

“Following reports that home sales are flat to down, price gains are beginning to moderate,” said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.

Blitzer added that prices and sales of new single-family homes are weakening; also that housing starts are mixed and residential fixed investment is down in the last three quarters.

Danielle Hale, chief economist at Realtor.com [3] sounded a familiar refrain.

“Coupled with mortgage rate increases that picked up steam in September, higher prices are stifling home sales as more buyers are priced out of the market,” Hale said.

Blitzer, meanwhile, said there are no signs that the current weakness will become a repeat of the housing crisis.

“Without a collapse in housing finance like the one seen 12 years ago, a crash in home prices is unlikely,” he said.

Hale is still concerned, though.

“Building entry-level homes have been a near impossibility for builders, and there are no signs of change on the horizon,” she said.