Home prices rising at slowest pace since 2012

U.S. home prices in July showed their smallest annual gains since late 2012, according to a closely watched barometer of the market.

The Standard & Poor's/Case-Shiller 20-city index shows prices rose 6.7% in July from a year earlier, S&P said Tuesday. That's the smallest year-over-year gain since November 2012 and continues a trend of decelerating prices.

Price gains shrank from a year ago in 19 of the 20 cities. Las Vegas, Miami and San Francisco were the only cities with double-digit increases from July 2013.

Monthly gains were also smaller than in June in 17 cities. San Francisco prices, among the highest in the nation, actually fell 0.4% in July, the largest amount since February 2012.

Despite shrinking price gains, home prices are still rising two or three times the rate of inflation, said David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices.

And moderating prices, while distressing for some sellers, will cheer buyers.

The good news, said IHS Global Insight economists Patrick Newport and Stephanie Karol, is that fundamentals are driving home prices in the majority of cities in the Case-Shiller Index. In May-July period, seasonally adjusted inventories of existing homes grew 5.3% from a year earlier — the largest gain since 2011, they said in a research note.

With job markets gaining strength in many of the 20 cities, that could lead to more home purchases later in the year, Newport and Karol predicted.

Las Vegas, one of the hardest hit housing markets in the recession, continues to lead cities in annual price gains. Prices there were up 12.8% year over year.

Phoenix, the first city to see double-digit gains as the housing prices started climbing sharply, posted its lowest annual return since February 2012 — 5.7%.

As of July, average home prices are back to autumn 2004 levels, S&P said.

The Case-Shiller 20-city index has climbed 29.3% from its March 2012 low, but remains more than 16% off its mid-2006 peak.