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Home Price Increases Continue to Cool

Home prices as measured by S&P Dow Jones performed more or less as expected in February, with annual growth rates continuing to slow.

The S&P/Case-Shiller Home Price Indices, considered one of the preeminent measures among home price indicators, shows prices among 20 of the nation’s biggest markets grew 0.8 percent on a seasonally adjusted basis in February, matching January’s rate of growth. Unadjusted, the index was unchanged month-over-month, though even that was an improvement over a 0.1 percent drop to start the year.

The narrower 10-city composite index outperformed January’s results, ticking up 0.9 percent adjusted and staying flat unadjusted.

“Prices remained steady from January to February for the two Composite indices,” said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, adding, however, that “annual rates cooled the most we’ve seen in some time.”

On a year-over-year basis, the 20-city index gained 12.9 percent in February, while the 10-city composite climbed 13.1 percent.

Thirteen cities saw lower annual rates in February, including Las Vegas, with a growth rate of 23.1 percent versus 24.9 percent in January. In addition, 13 cities posted declines on a monthly basis, with mostly markets along the West Coast seeing growth.

Even with the West leading in gains, the region remains deflated compared to its peaks, and Denver and Dallas remain the only cities to climb to new price peaks since the crash.

The Case-Shiller Indices are the third price metric for February to be released in the last week. The first, put out by the Federal Housing Finance Agency, showed a 6.9 percent gain in house prices over the year, while Black Knight Financial Services' own Home Price Index showed a 7.6 percent increase.

Despite reports of continued—albeit slower—price increases, Blitzer notes “other housing statistics are weak.”

“Sales of both new and existing homes are flat to down. The recovery in housing starts, now less than one million units at annual rates, is faltering,” he said.

Some blame rising interest rates for bringing down sales rates, while others point to difficulties in qualifying for loans and concerns about consumer confidence. Whatever the cause, Blitzer says, “[t]he result is less demand and fewer homes being built.”

“Five years into the recovery from the recession, the economy will need to look to gains in consumer spending and business investment more than housing. Long overdue activity in residential construction would be welcome, but is certainly not assured,” he concluded.

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