After last year’s sharp gains, the increase of US home prices seems to be slowing down, according to the results reported by major real estate market surveys.
The monthly report issued by the Federal Housing Finance Agency (FHFA) shows that home prices stayed at the same level in April, and there has been an annual gain of 5.9% over the last 12 months. Since December, when it stood at 7.7%, FHFA’s annual rate of change has been marked by a gradual decrease.
The Standard & Poor’s/Case-Shiller monthly home price indices confirm this slowing down since 2013. According to the S&P 20-city composite, the drop in the annual gain clearly illustrates the market trend, with a decrease from last year’s November peak of 13.8% to April’s 10.8% level. The index showed a 1.1% gain over May, on a monthly basis analysis.
Problems continue despite encouraging outlook
The annual gains are lower despite the April increase in home prices. This slower ascending trend in home prices is obvious in the month-to-month evolution. The housing market seems to be favored by short-term economic figures, as mortgage rates are expected to stay low in the near future. These favorable conditions are also supported by the gradual acceleration of employment. Nevertheless, many borrowers still cannot qualify for a loan, and first-time homebuyers show reluctance to buy.
The growing home prices may be slowed down by a slight increase in the number of homes available for sale. According to a report issued by The National Association of Realtors, April had a 5.5 month supply for single-family homes on the market, which is an increase from the 5.1 months in December and 4. 6 months in July 2013.
Cash sales maintain their market position
Over the last years, all-cash sales have accounted for approximately 33% of all home purchases. And this market share remains unchanged in 2014. Supported by investors, cash sales have favored the increase in the home prices.
The current slowing down of prices increase does not seem related to mortgage rates, since current rates are actually lower than they were this time, last year.
As shown by FHFA, US home prices have reached roughly the level of July 2005, recovering to within 6.9% of their pre-crash peak in April 2007. According to the S&P index, home prices are now 19% lower than the pre-cash highs. The S&P survey relies on repeat sales of individual properties in 20 major metropolitan areas whereas the FHFA figures use purchase mortgage data from Freddie Mac and Fannie Mae.