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Home Prices Up 4.5% In June, S&P/Case-Shiller Says

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Home sales prices rose 4.5% in June, indicating that price growth has flattened out despite more demand for housing, a report released Tuesday indicated.

Home sales prices grew 4.5% (seasonally adjusted) year-over-year in June, according to the S&P/Case-Shiller National Home Price Index, which tracks all nine Census divisions. That pace was slightly faster than the 4.4% annual gain in May. The pace of growth in the nation’s large cities was a bit faster, with the index tracking 20 major cities gaining an annual 5% in June, the 10-city index up an annual 4.6%.

“Nationally, home prices continue to rise at a 4-5% annual rate, two to three times the rate of inflation,” noted David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices.” Price appreciation has slowed for more than two years and seems to have stabilized around the 4-5% mark.

National Index, year-over-year change in prices (seasonally adjusted):

June 2015: 4.5%

May 2015: 4.4%

April 2015: 4.2%

March 2015: 4.3%

February 2015: 4.2%

January 2015: 4.5%

December 2014: 4.6%

November 2014: 4.7%

October 2014: 4.7%

September 2014: 4.8%

August 2014: 5.1%

July 2014: 5.6%

June 2014: 6.3%

May 2014: 7.1%

April 2014: 7.9%

March 2014: 9.0%

February 2014: 10.2%

January 2014: 10.5%

December 2013: 10.8%

November 2013: 10.8%

October 2013: 10.9%

September 2013: 10.6%

August 2013: 10.2%

July 2013: 9.7%

June 2013: 9.2%

The slower rise in home prices is somewhat surprising given the pent-up demand, and the fact that builders have been producing fewer than the 1.5 million homes annually needed to meet demand. Recent reports indicate that building is on the rise. In July housing starts hit their highest level in eight years as sales of existing-home (previously owned) hit their fastest pace in nearly eight-and-a-half. Groundbreakings on new homes rose 10.1% year-over-year in July to reach their highest level since October 2007, according to the Commerce Department. 

“The missing piece in the housing picture has been housing starts and sales. These have changed for the better in the last few months," Blitzer said. "Sales of existing homes reached 5.6 million at annual rates in July, the strongest figure since 2007. Housing starts topped 1.2 million units at annual rates with almost two-thirds of the total in single family homes. Sales of new homes are also trending higher. These data point to a stronger housing sector to support the economy."

The year-over-year change in sales prices varied widely by city. Denver, San Francisco, and Dallas reported the highest year-over-year price gains among the cities, at 10.2%, 9.5%, and 8.2% respectively. Eleven of the 20 cities posted greater year-over-year price gains in June than May. Miami experienced an annual gain of (7.7%), followed by Portland (7.8%)and Seattle (7.4%), Los Angeles (6.3%), Las Vegas (6.1%), Tampa and Atlanta (both 5.4%). Chicago (1.4%), Washington, D.C. (1.6%), and Cleveland (2.8%) had the slowest annual price gains in June.

On a monthly  (seasonally adjusted) basis, the National Index inched up 0.1% in June, while the 10- and 20-City Composites were both down by 0.1%. All 20 cities clocked price increases in June before seasonal adjustment; after, nine were down, nine were up, and two were unchanged.

“The slowdown in price growth is important going forward as we enter the slower home-buying season," said Selma Hepp, chief economist at Trulia. "Affordability pressures are already weighing down some markets, especially in California where job growth and a lack of supply has been pushing prices higher. Meanwhile, some prospective buyers have been concerned about rising interest rates, which has tested their confidence in deciding whether to buy now or later.”

As of June 2015, average home prices in the 10 and 20 metro areas the indices track are back to their winter 2005 levels, but about 12-14% off their summer 2006 peaks. Since their March 2012 lows, the 10-City and 20-City indices have bounced back by 33.8% and 34.9%, respectively.

“Between Greek default, war, plummeting oil prices and most recently fears of a Chinese slowdown, it’s been a volatile summer," said Zillow's chief economist Svenja Gudell. “But even as the market overall has been inconsistent, the housing market in particular has largely remained on the same course – a steady slowdown, with monthly home value growth even turning negative. This will have mostly positive impacts on housing and will eventually lead to more inventory and more stable growth.”