WASHINGTON – U.S. Home prices continued to show solid growth in most of the country due to limited inventory conditions, but rising prices and severe winter weather caused existing-home sales to slip in February, according to the National Association of Realtors®. Prices slipped in January for a third straight month after a particularly harsh winter, according to data released Tuesday, as strong year-over-year appreciation showed signs of moderating.
U.S. home prices ticked down 0.1% in January, with 12 of 20 tracked cities posting drops, according to S&P/Case-Shiller’s 20-city composite index. After seasonal adjustments, home prices in January rose 0.8%. Separately, the Federal Housing Finance Agency reported that prices rose 0.5% on a seasonally adjusted basis in January.
On a year-over-year basis, home prices rose 13.2% in January, down from 13.4% in December and a recent peak of 13.7% in November, according to the Case-Shiller data.
According to the National Association of Realtors, total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 0.4% to a seasonally adjusted annual rate of 4.60 million in February from 4.62 million in January, and 7.1% below the 4.95 million-unit level in February 2013. February’s pace of sales was the lowest since July 2012, when it stood at 4.59 million.
Including January, prices remained about 20% below a 2006 peak.
Economists have expected home price growth to slow given a variety of factors facing the housing market this year. For one, although home loans remain relatively cheap, rates on fixed mortgages have climbed about one percentage point over the past year, cutting affordability and some demand. Also, rapid price gains over the past year should encourage more sellers to place their homes on the market, thereby raising inventory and cutting upward pressure on prices.
While sellers won’t love slower price growth, a moderating pace isn’t necessarily a bad thing. Prices that run too high too quickly for an extended period would keep many would-be buyers from purchasing a home.
Lawrence Yun, NAR chief economist, said conditions in February were largely unchanged from January. “We had ongoing unusual weather disruptions across much of the country last month, with the continuing frictions of constrained inventory, restrictive mortgage lending standards and housing affordability less favorable than a year ago,” he said. “Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year.”
The median existing-home price for all housing types in February was $189,000, which is 9.1% above February 2013.
Distressed homes – foreclosures and short sales – accounted for 16% of February sales, compared with 15% in January and 25% in February 2013.
Eleven percent of February sales were foreclosures, and 5% were short sales. Foreclosures sold for an average discount of 16% below market value in February, while short sales were discounted 11%, according to national data collected by NAR.
There’s concern about recent weakness in housing-market data. Tuesday morning, the government reported that the sales pace of new single family homes fell in February to a five-month low.
But there are also indications that years after the end of the recession the level of household formation remains, as Federal Reserve Chairwoman Janet Yellen recently said, “very depressed.” Healthy job growth is a key support for home buying, and recent data have shown employment weakness.
Also of note, the Case-Shiller data illustrates the country’s uneven housing-market recovery. Dallas and Denver recently posted fresh home-price records, while in Detroit, prices are 26% below a bubble peak. Elsewhere, home prices in Las Vegas, which was hit particularly hard when the bubble burst, are 45% below a bubble peak.