NEW YORK – Oct. 29, 2014 – Home prices continued to rise more slowly in August, turning in their smallest year-over-year gains in nearly two years, a closely followed report out Tuesday shows.
The Standard & Poor's/Case-Shiller 20-City Index of home prices rose 5.6 percent from August 2013, S&P said.
That's down from a 6.7 percent gain in July and well below the double-digit annual increases seen in most of 2013 and earlier this year.
The broader S&P/Case-Shiller National Home Price Index also slowed in August, posting a 5.1 percent annual gain compared with 5.6 percent in July.
Slower rising home prices bode well for the housing market's continuing recovery nearly seven years after the market's historic collapse, economists say.
Greg Bird, an economist with Moody's Analytics, points to the smaller decline in the national price index than the 20-city index. Price appreciation is slowing most in big cities where gains were sharpest in recent years due to investor demand for foreclosures and distressed properties, Bird says. But prices have been rising slowly all along in markets that didn't see such feverish investor buying.
Increasing household formation and restrained home building is a recipe for prices to climb, but gains are likely to be modest over the next couple of years, Bird says.
Stan Humphries, chief economist of the real estate website Zillow, says the recovery is shifting to a more slow and steady course.
"In housing, boring is better," he says. "As appreciation cools and more inventory comes on line, buyers will start to gain a more competitive advantage, after years of sellers being in the driver's seat. More sedate home value growth, coupled with interest rates that remain incredibly low, will also help housing stay affordable, which is critical to drawing in the next generation of younger, first-time buyers that had been sitting on the sidelines."
The Case-Shiller report shows annual gains fell in 19 of the index's 20 cities in August, with Cleveland being the lone exception. The slowdown was greatest in Las Vegas, where the year-over-year return fell from 12.8 percent in July to 10.1 percent in August.
Miami, which had a 10.5 percent annual gain, took the lead away from Las Vegas as the city with the sharpest annual gain. In San Francisco, average prices rose 9 percent in August – the first month since November 2012 when the annual increase was measured in single digits.
Copyright © 2014 USA TODAY, Doug Carroll
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