Nationally, asking prices rose 0.8 percent month-over-month and 2.8 percent quarter-over-quarter in April. Yet asking prices rose a mere 9.0 percent year-over-year, the smallest gain in 11 months, according to an analysis of data from Trulia's Price Monitor and Rent Monitor. With monthly and quarterly increases holding steady, why are yearly increases slipping?
One reason for the slippage is from a large price spike during the housing recovery in February and April of 2013, according to Trulia's chief economist, Jed Kolko. Year-over-year changes in April 2014 no longer include these elevated months, dropping yearly asking price numbers.
Asking prices are still relatively similar without the population of foreclosures. Trulia’s Price Monitor noted that monthly and quarterly gains were the same at 0.8 and 2.8 percent, respectively. Year-over-year gains were slightly less at 8.4 percent.
Another reason cited by the company is a lag in construction, especially in housing markets with the biggest price rebounds. "The housing markets with the largest year-over-year asking-price increases in April 2014 were Riverside-San Bernardino, Las Vegas, Oakland, Sacramento, and Detroit, all of which are rebounding from steep price declines during the housing bust. However, big price rebounds are no guarantee that a local housing market has recovered," Kolko said.
Furthermore, construction permit data for 2013 from the U.S. Census revealed that markets with the largest price rebounds are still lagging in construction activity. Kolko notes that even in cities experiencing the largest booms in construction, metros like New York, Boston, or San Francisco, gains are for multi-unit buildings to be rented for apartments, not sold as condos.
"Nearly all of the markets where asking prices rose most year-over-year still have much less construction than what’s normal for those markets. Instead, builders are building in markets that avoided the worst of the bust and are therefore not having big price rebounds today," Kolko said.
The slowdown of yearly price gains could be problematic for recent sellers, who are increasingly pricing their homes above market value in an effort to capitalize on what they perceive to be a seller’s market.