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US home prices rising at slower rate
At the same time, more cities starting to show reacceleration, with prices set to rise faster in 2015
The S&P/Case-Shiller index of property values increased 4.5 per cent from October 2013, the smallest gain in two years, after rising 4.8 per cent in the year ended in September, a report from the group showed on Tuesday in New York. The median projection of 24 economists surveyed by Bloomberg called for a 4.4 per cent advance. Nationally, prices rose 4.6 per cent after a 4.8 per cent gain in the year ended in September.
While smaller increases will help put ownership within reach of more Americans as the job market improves and wage gains accelerate, prices are still up 25 per cent from the depths reached following the recession. That rebound in property values has helped repair homeowners' finances, which is contributing to gains in consumer confidence and spending that are driving the economic expansion.
"As you look forward, we're considering a housing market that should be a more normal housing market, which means driven by the pace of income and other aspects of affordability," said Michelle Meyer, a senior US economist at Bank of America Corp in New York, who correctly projected a slowing in home price appreciation. "Price appreciation should slow to fall more in line with the growth in income."
Economists' estimates in the Bloomberg survey ranged from gains of 3.9 per cent to 5 per cent. The S&P/Case-Shiller index is based on a three-month average, which means the October figure also was influenced by transactions in August and September.
Home prices in the 20-city index, adjusted for seasonal variations, increased 0.8 per cent in October from the prior month, the biggest gain since March. It exceeded the Bloomberg survey median that projected a 0.4 per cent advance. Unadjusted prices dropped 0.1 per cent.
The year-over-year gauge, based on records dating back to 2001, provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.
While the year-to-year returns are cooling, more cities are starting to show a reacceleration, which bodes well for next year, according to the report.
Twelve cities experienced smaller year-to-year gains in October compared with the prior month, down from 18 in September and 20 in August. The eight cities that saw prices rise faster in October included San Francisco, Denver and Tampa, Florida.
"We are seeing hints that prices could end 2014 on a strong note and accelerate into 2015," David Blitzer, chairman of the S&P index committee, said in a statement.
All 20 cities in the index showed a year-over-year gain, led by a 9.5 per cent climb in Miami and a 9.1 per cent advance in San Francisco. Cleveland showed the smallest increase, with prices rising 0.9 per cent.
Borrowing costs still hovering near record lows may help draw more buyers into the market. The average rate on a 30-year, fixed mortgage was 3.83 per cent in the week ended Dec 25, the second-lowest since May 2013, according to Freddie Mac data. The rate dropped by 0.65 percentage point this year after rising 1.13 percentage points in 2013.
November data show residential real estate losing traction. Purchases of previously owned homes fell more than forecast in November to a 4.93 million annual rate, the weakest reading since May, figures from the National Association of Realtors showed last week.
New-home sales unexpectedly declined in November to a four-month low, further demonstrating a lack of momentum in the market as it enters the slower winter months. Sales dropped 1.6 per cent to a 438,000 annualised pace last month following a 445,000 rate in October that was weaker than previously estimated, Commerce Department figures showed last week.
Home-improvement retailer Lowe's Cos of Mooresville, North Carolina, is counting on healthy US growth prospects to sustain the housing recovery over the next three years.
"Overall macro growth will bode well for industry, particularly, the improving trends in income and housing," Chief Financial Officer Robert Hull said at a Dec 11 investor conference. "A strengthening job market should contribute to disposable personal income growth", while households already are "becoming more financially fit", he said.
Payroll gains on track for their best year since 1999 also are bolstering potential home buyers. Employers have added an average 240,910 jobs per month in 2014 through November and the unemployment rate has fallen to 5.8 per cent from 6.7 per cent at the end of last year. Bloomberg
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