U.S. Home Price Gains Slow
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House prices continue to rise in the United States, but at a slower pace than before.
A new study by S&P Dow Jones shows that home prices rose 4.9% year-over-year in the 20 largest cities in the country, while prices gained 4.6% year-over-year in the 10-city composite. Those figures are for April, when some analysts expected price gains to slow because of cold weather hindering demand.
House prices continue to rise in the United States, but at a slower pace than before.
A new study by S&P Dow Jones shows that home prices rose 4.9% year-over-year in the 20 largest cities in the country, while prices gained 4.6% year-over-year in the 10-city composite. Those figures are for April, when some analysts expected price gains to slow because of cold weather hindering demand.
The report also noted that all cities are seeing price growth in a sign that demand for homes continues to rise across the country. “All 20 cities reported increases in April before seasonal adjustment; after seasonal adjustment, 12 were up and eight were down,” the report said.
Stable Growth
The deceleration in price growth shows that the housing recovery is moderating, without signs of a bubbly and unsustainable rise in house demand as was experienced in the 2000s.
According to S&P Dow Jones Indices Chairman of the Index Committee David M. Blitzer, the current rise in prices is consistent with historical trends and shows a steady increase in demand. “Moreover, consumer expectations are consistent with the current pace of price increases. A recent national survey published by the New York Fed showed the average expected price increase among both owners and renters is 4.1%. Both the current rate of home price increases and the consumers’ expectations are a bit lower than the long term annual price change of 4.9% since 1975,” he said.
Additionally, Blitzer noted that the demand for housing is having a knock-off effect that is benefitting the construction and new homebuilding industries, which could in turn have broader economic benefits. “Recent housing data is positive. Sales of new and existing homes are rising in recent reports and construction of new homes enjoyed strong gains in May. At the same time, the proportion of new construction that is apartments rather than single-family homes remains high. In the past year, 34% of housing starts were apartments, compared to 22% on average since 1975,” he said.
Regional Variations
Growth in prices was solid in all of the 20 cities in the index, with San Francisco and Denver seeing gains of 10% or more. The lowest gains were in Washington D.C., Cleveland, and Boston, which all had year-over-year growth of less than 2%, below the rate of inflation.
Economists broadly agree that strict building regulations have caused prices to soar in San Francisco, which is currently the most expensive city in the United States. After overtaking New York City for costs, San Francisco has continued to see price gains since the global financial crisis, and the trend expects to continue. However, Los Angeles came in as the priciest city for real estate according to the S&P Case Shiller index, which saw L.A. houses at 232.87 on the index, above San Francisco’s 210.28.
The cheapest city for real estate remains Detroit, the only city to score below 100 on the index, at 98.94.
