S&P: Annual Home Price Gains Continue Decline

The Standard & Poor’s CoreLogic Case Shiller Indices showed home price increases across the U.S. continued to slow in February, suggesting that the transition from a seller’s market to a buyer’s market is underway.

Year over year, the U.S. National Home Price NSA Index reported a 4.0% annual gain in February, down from 4.2% in January. The 10-City Composite annual increase slowed to 2.6%, down from 3.1% in January. The 20-City Composite posted a 3.0% year-over-year gain, down from 3.5% in January.

February marked the 11th consecutive month of slowing home price increases, to the slowest level since 2012.

Las Vegas, Phoenix and Tampa reported highest year-over-year gains, with Las Vegas showing a 9.7% year-over-year price increase, followed by Phoenix at 6.7% and Tampa at 5.4%. Only one of the 20 cities reported greater price increases in the year ending February from January.

Month over month, before seasonal adjustment, the National Index posted 0.2% increase in February. The 10-City and 20-City Composites both reported 0.2% increases for the month. After seasonal adjustment, the National Index showed an 0.3% month-over-month increase; the 10-City and the 20-City Composites both posted 0.2% month-over-month increases. Fourteen of 20 cities reported increases before seasonal adjustment, while 17 of 20 cities reported increases after seasonal adjustment.

“The pace of increases for home prices continues to slow,” said David M. Blitzer, Managing Director and Chairman of the Index Committee with S&P Dow Jones Indices. “Homes began their climb in 2012 and accelerated until late 2013 when annual increases reached double digits. Subsequently, increases slowed until now when the National Index is up 4% in the last 12 months.”

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

“While we may not be in a buyer’s market quite yet, some states are showing signs of becoming one very soon. Change is on the horizon,” said Ralph McLaughlin, CoreLogic deputy chief economist and executive of research and insights. “Slowing U.S. home price growth has primarily been driven by affordability constraints in a few of our largest, most expensive housing markets. And while we’re not in a buyer’s market yet, several Pacific Coast markets are on the cusp of seeing the first annual declines in home prices since 2012. In places like San Diego, San Francisco and Los Angeles, the proverbial chickens will be coming home to roost this spring because they haven’t been able to find a decently affordable coop.”

McLaughlin added given persistent affordability constraints along the Pacific Coast over the past several years, “it’s quite possible that March or April’s numbers could bring the first markets to see price declines since December 2012.”