Home Prices Cool Most in 4 Years, Las Vegas Soars

U.S. home prices are still rising, but at the slowest pace since April of 2015, according to the S&P CoreLogic Case-Shiller national home price index for January released Tuesday. The year-over-year increase of 4.3% was two full percentage points below the 6.3% increase posted in January of 2018. Month over month, the index dropped from 4.6% in December. January was the sixth straight month that home prices have grown more slowly than they did a year ago.

Some cities posted much larger annual increases. Las Vegas home prices are 10.5% higher than they were a year ago, while Phoenix showed an increase of 7.5% and both Minneapolis and Charlotte posted increases of 5.1%. The U.S. city with the smallest annual price gain was San Diego, where prices increased just 1.3%.

The consensus economists’ estimate called for the national average home price to rise by 4.1% compared with January 2018.

In all U.S. cities included in the 20-city home price index, January house prices rose 3.6% year over year, with 14 of 20 posting non-seasonally adjusted (NSA) month-over-month price decreases. On an NSA basis, month-over-month prices dropped 0.2% on the 20-city index. Analysts were expecting prices to remain flat month over month.

David M. Blitzer, chair of the S&P index committee, said, “Home price gains continue to shrink. … Mortgage rates are as important as prices for many home buyers. Mortgage rates climbed from 3.95% in January 2018 to a peak of 4.95% in November 2018. Since then, rates have dropped to 4.28% as of mid-March. …  It remains to be seen if recent low mortgage rates and smaller price gains can sustain improved home sales.”

Mortgage loan rates had dropped to 4.11% Tuesday morning, according to Mortgage News Daily, after dropping 0.25% in the prior week to a top-tier rate of 4.125%. The slide was greased by the Federal Reserve’s announcement last week that no further policy rate hikes are being considered for this year and that the Fed would end its balance sheet run-off later this year. That means the Fed plans to start buying more bonds, which lowers the rate of interest the federal government has to pay and, in turn, lowers mortgage rates.

A slower pace of home price growth, lower interest rates and low unemployment appear to be ready for the spring home-buying season. Now we just have to wait and see if buyers are as upbeat.

Metro Area January 2019 1-Year Change
Atlanta 148.36 4.90%
Boston 214.59 4.60%
Charlotte 159.62 5.10%
Chicago 141.77 2.40%
Cleveland 121.72 3.80%
Dallas 188.19 3.80%
Denver 215.61 5.00%
Detroit 123.26 5.00%
Las Vegas 189.62 10.50%
Los Angeles 280.87 2.90%
Miami 240.39 4.80%
Minneapolis 171.40 5.10%
New York 201.94 3.00%
Phoenix 187.23 7.50%
Portland 231.57 3.30%
San Diego 251.37 1.30%
San Francisco 258.12 1.80%
Seattle 243.63 4.10%
Tampa 214.45 5.10%
Washington 227.05 3.10%
Composite-10 225.93 3.20%
Composite-20 212.41 3.60%
U.S. National 204.71 4.30%

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