WASHINGTON (AP) — U.S. home prices increased at a slower pace in June — a cooldown that could continue for several more months.
The Standard & Poor's/Case-Shiller 20-city home
price index rose 8.1 percent in June from 12 months earlier, according
to a Tuesday report. That's down from 9.4 percent a month earlier and
the smallest annual gain since December 2012.
Yearly price growth weakened in all 20 cities. Home
values in Cleveland nudged up just 0.8 percent. Las Vegas led with a
15.2 percent gain. But prices in Las Vegas, Phoenix, Miami and Tampa,
Florida, are still at least 33 percent below their housing bubble peaks
of almost a decade ago.
The deceleration should help ease some of the price
pressures on would-be buyers. After slumping at the start of 2014,
existing-home sales have picked up as price gains have slowed. But
buying remains 4.3 percent below the July 2013 level, according to the
National Realtors Association.
Price growth should continue to slow now that the
recovery from the Great Recession has entered its sixth year. Many
economists project that the Federal Reserve will begin to raise
short-term interest rates in 2015 because the economy has strengthened,
which could cause mortgage rates to rise from relative lows and make it
more expensive to borrow.
"Rising mortgage rates won't send housing into a
tailspin, but will further dampen price gains," said David Blitzer,
chairman of the index committee at S&P Dow Jones Indices.
Even hot markets such as San Francisco_where a
two-bedroom condominium can cost more than $1 million_are finding that
price growth has slowed. Prices in that city rose 12.9 percent in June,
compared with an annual growth rate of 18.4 percent in April.
The sharp price gains of the past few years had been
part of a natural snap back in response to the devastating housing
bust, which triggered the recession at the end of 2007. Still, the
fallout from that downturn continues to cast a shadow over the real
Nearly 35 percent of homeowners are "effectively
underwater" on their mortgages, meaning that they either have less than
20 percent equity in their homes or could not sell their properties and
have enough money left over for a down payment on another home, the
online real estate firm Zillow said Tuesday.
The consequence of this is that fewer homeowners are
willing to list their homes for sale. The impact is disproportionately
been felt among Generation X. More than 42 percent of this generation —
35- to 49-year olds— owe more on their mortgages than their homes are
worth. Nearly a third of baby boomers between the ages of 50 and 64 are
in the same predicament.
That in turn makes it harder for the younger millennial generation to afford homes, said Zillow Chief Economist Stan Humphries.
"Because so many homes are stuck in negative equity
or are effectively underwater, the inventory of homes for sale is
severely constrained, leading to more competition for those that are
available," Humphries said. "And millennials likely don't have the
resources to compete with cash offers or engage in bidding wars."
New construction is increasingly catering toward apartment rentals and high-end homes, pricing out many other would-be buyers.
The Commerce Department said Monday that new-home
sales fell 2.4 percent in July to a seasonally adjusted annual rate of
412,000. New-home sales lost much of their upward trajectory toward the
end of last year, hurt by modest wage growth and a bump in mortgage
rates after the Fed initially signaled a shift in its policies.