S&P: Home Price Annual Gains Slow to End 2018

The S&P CoreLogic Case-Shiller U.S. National Home Price Index reported a 4.7 percent annual gain to end 2018, down from November and a year ago.

The national index fell from 5.1% in November. The 10-City Composite annual increase slowed to 3.8%, down from 4.2% in November. The 20-City Composite posted a 4.2% year-over-year gain, down from 4.6% in November.

Las Vegas, Phoenix and Atlanta reported the highest year-over-year gains among the 20 cities. In December, Las Vegas led with an 11.4% year-over-year price increase, followed by Phoenix at 8.0% and Atlanta at 5.9%. Three of the 20 cities reported greater price increases in the year ending December from a year ago.

Month over month, before seasonal adjustment, the National Index posted a decrease of 0.1% in December. The 10-City and 20-City Composites both reported 0.2% decreases for the month. After seasonal adjustment, the National Index recorded a 0.3% month-over-month increase in December. The 10-City Composite and the 20-City Composite both posted 0.2% month-over-month increases. In December, five of 20 cities reported increases before seasonal adjustment, while 14 of 20 cities reported increases after seasonal adjustment.

“The annual rate of price increases continues to fall,” said David M. Blitzer, Managing Director and Chairman of the Index Committee with S&P Dow Jones Indices. “Even at the reduced pace of 4.7% per year, home prices continue to outpace wage gains of 3.5% to 4% and inflation of about 2%. A decline in interest rates in the fourth quarter was not enough to offset the impact of rising prices on home sales.”

As of December, the report said average home prices for metros within the 10-City and 20-City Composites are back to their winter 2007 levels.

“For years, the housing market has been anything but ‘normal’ or ‘balanced,'” said Aaron Terrazas, senior economist with Zillow, Seattle. “But as the start of the busy home shopping season looms, someone squinting at the market might be able to find signs of both normalcy and balance as the market continues to cool off after a years-long sizzle.”

Terrazas noted annual home price growth, while still rapid in a handful of the most in-demand and/or affordable markets, has fallen to a pace not far off historic norms and feels “largely sustainable” for now at a national level around 5 percent. “Inventory is certainly not ‘back,’ but modest gains are being made month-after-month, and buyers are likely to have more choice this spring than they have in years,” he said. “Mortgage interest rates have stabilized below recent peaks, and look set to remain in their current range near historic lows for the time being, a boon to buyers’ budgets. On their own, none of these small shifts would likely move the needle much in terms of rebalancing the buyer/seller dynamic, but taken together they represent a meaningful swing in buyers’ favor–just in time for spring.

“2018 was a turning point for home-price growth in the U.S. housing market,” said Ralph McLaughlin, deputy chief economist and executive of research and insights with CoreLogic. “In 2018, we saw monthly over-the-year gains in home prices grow at the slowest rate for a calendar year since 2014. With inventory now rising from historic lows and price gains continuing to outpace wage growth, we should see home price appreciation settle toward more reasonable levels throughout 2019 and the remainder of this economic cycle.”