Home prices up 2.1% from '18

Modest increases from August to September, report says

The rise in home prices has outpaced wage growth for several years, and the market is now constrained by buyers’ capacity to pay.
The rise in home prices has outpaced wage growth for several years, and the market is now constrained by buyers’ capacity to pay.

WASHINGTON -- U.S. home prices increased modestly in September from a year ago, as roughly seven years of rising home values have eroded affordability.

The S&P CoreLogic Case-Shiller 20-city home price index rose 2.1% in September from a year ago, up from a 2% annual gain in August, according to a Tuesday report.

A separate report from the Federal Housing Finance Agency showed home prices advanced 0.6% in September from a month earlier, the most since January.

"For many buyers, the fall housing market provides several challenges and opportunities," said George Ratiu, senior economist at realtor.com. "While lower financing costs and a rising number of new homes are welcome signs in a market parched for inventory, prices are still climbing and the number of existing houses in the affordable price range is down by double-digits."

Other data point to a healthier housing market. Sales of existing properties that make up the vast majority of transactions increased in October for the third time in four months.

Sales of new homes dipped slightly in October compared with September but remain well above levels of a year ago, with lower mortgage rates helping spur a rebound in purchases.

Prices have so steadily outpaced wage growth for several years that the market is now constrained by buyers' capacity to pay. Home values have tumbled 0.7% in San Francisco and increased just 0.8% in New York and 1.7% in Seattle.

Ralph McLaughlin, deputy chief economist at CoreLogic, noted that prices in San Francisco were climbing 9.9% annually just a year ago, evidence of how swift the deceleration has been.

Still, there are signs that low mortgage rates are increasing demand and prices could rise at faster pace in the months ahead as there is a shortage of listings.

Of the major metro areas, Phoenix led with annual price gains of 6%, followed by Charlotte at 4.6% and Tampa at 4.5%.

The Federal Housing Finance Agency's data, derived from conforming mortgages, also showed that prices in the third quarter increased 1.11% from the previous three months, the smallest advance since the second quarter of 2014. Compared with the third quarter of last year, prices rose 4.9%, the smallest gain since the first quarter of 2015.

Separately, the annual rate of single-family new-home sales slipped 0.7% last month to a seasonally adjusted 733,000, the Commerce Department said Tuesday. But that decline followed robust gains of 4.5% in September and 7% in August.

Sales of both new and existing homes have been on an upswing since summer, lifted by lower borrowing rates. Residential construction added to overall economic growth in the July-September quarter after a long period of declines. Most economists expect this strength to continue.

In October, sales of new homes were up in the Midwest and West but fell in the Northeast and South.

The Northeast suffered the biggest drop-off in sales last month -- a decline of 18.2%. Purchases were down 3.3% in the South. They rose 7.1% in the West and 4.2% in the Midwest.

Overall, new home sales in October were up a hefty 31.6% compared with a year ago. Sales have been fueled in part by falling mortgage rates, which have been trending lower since the Federal Reserve switched from raising its benchmark rate four times last year to cutting rates three times this year.

The median price of a new home sold in October was $316.700, 3.7% higher than a year ago.

The National Association of Realtors reported last week that sales in the much bigger market for existing homes rose 1.9% in October to a seasonally adjusted 5.46 million. That level was 4.6% higher than a year ago.

Information for this article was contributed by Josh Boak and Martin Crutsinger of The Associated Press and by Katia Dmitrieva and Kristy Scheuble of Bloomberg News.

Business on 11/27/2019

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