US home prices increased in August, yet the pace of these gains continues to slow, helping to improve affordability for would-be buyers.
Prices rose 6.4 percent in August compared with a year ago, Real estate data provider CoreLogic said Tuesday. That marks a decline from an annual gain of 6.8 percent in July. Home prices had been rising as much as 12 percent yearly toward the end of last year.
Prices rose 0.3 percent in August from July. But CoreLogic's monthly figures aren't adjusted for seasonality, such as buying that occurs in warm weather.
Sales struck a plateau in the middle of last year and have remained subdued for much of 2014. As sales have slowed, so have price gains. That should eventually make it easier for would-be buyers to afford homes.
It was the second report of slowing price growth in the housing market in the past week. As the Christian Science Monitor reported last Tuesday, "Prices for single-family homes across the country’s major cities grew at their slowest pace in nearly two years in July, according Case-Shiller's monthly home price index. Both the 10-city and 20-city index fell 0.5 percent; year over year, both have risen 6.7 percent since July 2013. Economists had been expecting growth to remain flat at 0 percent."
After a few years of rapid acceleration, that slowed growth could make the market more accessible to those who had been pushed out previously:
On one level, that’s concerning. In some areas, including those hit hardest by the housing crash, prices still haven’t reached pre-recession levels, and a price deceleration won't help. However, “the good news is that this pace of growth indicates that home prices continue to be driven by fundamentals in the majority of these cities,” say IHS Global Insight economists Stephanie Karol and Patrick Newport in an e-mailed analysis. “In the three months ended July, seasonally-adjusted inventories of existing homes expanded 5.3p percent year-on-year, the largest such gain since 2011. Furthermore, yearly home price gains continue to outpace PCE inflation in all of the 20 cities except Cleveland.”
Coupled with an improving labor market in most cities, they say, a price slowdown could help ramp up home purchases later in the year.
Much of any uptick in buying will depend on wage growth picking up. Wages are barely matching inflation, making it harder for families to save for making down payments and monthly mortgage payments.
Hourly wages have risen just 2.3 percent over the past 12 months, the Labor Department reported last week. And separately, median incomes for an entire household are 8 percent below their 2007 levels after adjusting for inflation, averaging just $51,939 in 2013, according to the Census Bureau. This has occurred as banks have tightened credit standards.
All states registered home price gains in August, except Arkansas where prices were flat. Home values in Michigan rose 11.1 percent, followed by gains of 9.2 percent in both California and Nevada. The Houston area saw home values rise 11.1 percent compared to the prior year, while Los Angeles, Atlanta, Dallas and Riverside, California enjoyed similarly large gains.
Still, prices nationwide are 12.1 percent below their peak average in April 2006.
As the pace of price gains has slowed, so have sales of existing homes.
Purchases fell 1.8 percent to a seasonally adjusted annual rate of 5.05 million in August, the National Association of Realtors said. Sales fell from a July rate of 5.14 million, a figure that was revised slightly downward. Overall, the pace of home sales has dropped 5.3 percent year-over-year.
Economists associate annual sales of 5.5 million with a healthy market.
The Realtors also said that median sales price had risen 4.8 percent over the past 12 months to $219,800, but that average slipped slightly in August compared to prices in July and June.