Home prices in the U.S. grew 5.2 percent annually in November, but fell 0.1 percent from October, according to the latest Case-Shiller U.S. National Home Price NSA Index released on Tuesday.
That’s the fourth consecutive month in which annual home growth in the U.S. slowed or stalled, according to the widely-cited index. And experts responding to the news say that home price appreciation will continue to slow in the coming months.
Despite the slowdown, existing home sales have also gone down as affordability remains an issue for buyers, thanks in part to a previous run-up of home prices in the last few years.
“Home prices are still rising, but more slowly than in recent months,” said S&P Dow Jones Indices managing director and chairman of the index committee David M. Blitzer in a statement. “The pace of price increases are being dampened by declining sales of existing homes and weaker affordability. Sales peaked in November 2017 and drifted down through 2018.”
Blitzer says despite declining sales, the overall economy is strong — offering some solace to economists worried about a looming housing and economic crisis similar to that of 2008.
“Stable 2 percent inflation, continued employment growth, and rising wages are all favorable,” he added. “Measures of consumer debt and debt service do not suggest any immediate problems.”
Keller Williams senior economist Ruben Gonzalez says home price appreciation will likely drop below 5 percent in 2019, thanks to increased inventory and declining buyer demand caused by rising mortgage rates in 2018.
As a result, Gonzalez says income growth may finally catch up with home price growth — giving buyers a much-needed leg up in a competitive real estate market.
“In this environment, it will likely become more common for individuals selling homes to overprice their markets, leading to reductions in listing prices,” he said in an emailed statement. “Buyers may also begin to see slightly more leverage in terms of their ability to negotiate prices below list in markets that weren’t seeing much of that over the last couple of years.”
The National Association of Realtors (NAR), the residential industry’s largest trade group with over 1.3 million members, agrees that the rate of home price growth will match or fall below the rate of income growth for the first time in seven years, providing the following statement from its economist Lawrence Yun:
“The softening home price appreciation in the latest Case-Shiller index will continue in the upcoming months as housing inventory builds. But it is unlikely for the national median home price to actually decline given the housing shortage of moderately priced homes and from job additions in the economy. In 2019, home prices in many markets look to trail income growth for the first time since 2012. That is a healthy development of keeping housing affordability in check.”
And at least one expert believes price growth will cease entirely:
So Case Shiller house prices disappoint falling short of expectations. My work suggests they’ve got further to go and in the next few months I suspect prices won’t be rising at all. https://t.co/ZqWctMwBU3 pic.twitter.com/6ZD9qNPtYX
— Julian Brigden (@JulianMI2) January 29, 2019
Regionally, Las Vegas, continued to lead the way with a 12.0 percent year-over-year increase. San Francisco and Phoenix also saw increases of more than 6.3 percent.
About the Index
The S&P/Case-Shiller U.S. National Home Price Index is a composite of single-family home price indices that is calculated every month; the indices for the nine U.S. Census divisions are calculated using estimates of the aggregate value of single-family housing stock for the time period in question.
The nine divisions are:
- New England
- Middle Atlantic
- East North Central
- West North Central
- South Atlantic
- East South Central
- West South Central
CoreLogic serves as the calculation agent for the S&P/Case-Shiller U.S. National Home Price Index.