Home Price Gains Under 6% for First Time in Year; Housing Demand Up

Standard & Poor’s, New York, said annual home price gains fell under 6% for the first time in a year in August.

The S&P CoreLogic Case-Shiller National Home Price NSA Index reported a 5.8% annual gain in August, down from 6.0% in the previous month. The 10-City Composite annual increase came in at 5.1%, down from 5.5% in the previous month. The 20-City Composite posted a 5.5% year-over-year gain, down from 5.9% in the previous month.

Las Vegas, San Francisco and Seattle reported the highest year-over-year gains among the 20 cities. In August, Las Vegas led the way with a 13.9% year-over-year price increase, followed by San Francisco with a 10.6% increase and Seattle with a 9.6% increase. Four of the 20 cities reported greater price increases in the year ending August from July.

Month over month, before seasonal adjustment, the National Index posted an 0.2% gain in August. The 10-City and 20-City Composites did not report any gains for the month. After seasonal adjustment, the National Index recorded an 0.6% month-over-month increase in August. The 10-City Composite and the 20-City Composite both posted 0.1% month-over-month increases. Twelve of 20 cities reported increases before seasonal adjustment, while 17 of 20 cities reported increases after seasonal adjustment.

“Following reports that home sales are flat to down, price gains are beginning to moderate,” said David M. Blitzer, Managing Director and Chairman of the Index Committee with S&P Dow Jones Indices. “Other housing data tell a similar story: prices and sales of new single family homes are weakening, housing starts are mixed and residential fixed investment is down in the last three quarters. Rising prices may be pricing some potential home buyers out of the market, especially when combined with mortgage rates approaching 5% for 30-year fixed rate loans.”

The report said as of August, average home prices for the MSAs within the 10-City and 20-City Composites are back to their winter 2007 levels.

“There are no signs that the current weakness will become a repeat of the crisis, however,” Blitzer said. “In 2006, when home prices peaked and then tumbled, mortgage default rates bottomed out and started a three year surge. Today, the mortgage default rates reported by the S&P/Experian Consumer Credit Default Indices are stable. Without a collapse in housing finance like the one seen 12 years ago, a crash in home prices is unlikely.”

In a separate report, Redfin, Seattle, said its Housing Demand Index increased by 5.1 percent from August to 131 in September, after remaining essentially flat since May.

Redfin said the month-over-month increase in demand was driven more by growth in early stage home-buying activity than in the more serious stage of offer-writing. The report said the number of people requesting home tours increased 11.2 percent from August to September, the largest monthly increase in 16 months, while the number writing offers increased by 8.1 percent.

“Rising mortgage rates motivated some buyers to look for a home before rates rise again,” said Redfin Chief Economist Daryl Fairweather. “Second, inventory usually falls from August to September, but this year it rose 0.7 percent, giving buyers more homes to choose from.”