U.S. home prices rose at a modest pace in November, held back by weaker sales and a limited number of houses for sale.
The Standard & Poor’s/Case-Shiller 20-city home price index, released Tuesday, increased 4.3 percent in November from 12 months earlier. That’s down slightly from 4.5 percent in October. Home price gains have decelerated for 12 straight months.
The slowdown in price increases should help boost sales this year. Home values rose at a double-digit pace in early 2014, making many unaffordable. Sales of existing homes fell 3.1 percent to 4.93 million last year. First-time buyers in particular were priced out of many neighborhoods and accounted for a historically low proportion of sales last year.
Economists are hopeful that home sales and construction will rebound this year, partly because price gains are returning to levels consistent with a stable housing market. Lower mortgage rates, healthy hiring and lower down payment requirements from mortgage giants Fannie Mae and Freddie Mac may also spur sales.
“The housing market is heading in the right direction,” said Stan Humphries, chief economist at real estate data provider Zillow. “This year ought to be much more friendly for buyers in general. More inventory … slowing price gains and continued low mortgage rates will all contribute to buyers feeling more comfortable this year than in previous years.”
Home values have risen for lower-priced homes, Humphries said, which gives those homeowners more equity and should encourage more of them to sell. That should bring more modest-priced homes on the market that are affordable for first-time buyers, he added.
Home prices in all 20 cities increased over the past 12 months, the Case-Shiller index showed. San Francisco’s increase of 8.9 percent was the largest, followed by Miami at 8.6 percent. Cleveland posted the smallest gain, 0.6 percent.
Dallas-Fort Worth home prices, which rose 7.7 percent on the index, posted the third-highest increase among the 20 cities. DFW tied with Las Vegas.
The 20-city index fell 0.2 percent in November from October. The index’s monthly price changes aren’t adjusted for seasonal variations, such as slower home buying in winter. Eleven cities reported price gains in November from the previous month, led by Tampa’s 0.8 percent gain. Chicago’s price drop of 1.1 percent was the largest.
“With the spring home buying season, and spring training, still a month or two away, the housing recovery is barely on first base,” said David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “Prospects for a home run in 2015 aren’t good. Strong price gains are limited to California, Florida, the Pacific Northwest, Denver and Dallas. Most of the rest of the country is lagging the national index gains.”
Other recent data on housing suggests that sales and construction are on the upswing. Though sales of existing homes fell in 2014, they picked up in December, increasing 2.4 percent from the previous month to a seasonally adjusted annual 5.04 million. Many economists forecast that sales will rise to about 5.2 million this year.
Mortgage rates have fallen for four straight weeks, and the average rate on a 30-year fixed mortgage is just 3.63 percent. That makes it easier for would-be buyers to purchase a home. It has also prompted a spike of refinancing applications that could enable many Americans to lower their monthly mortgage payments, freeing up cash to spend or save.
Home construction, meanwhile, jumped 4.4 percent last month to an annual rate of 1.09 million. Builders began construction on 1.01 million houses and apartments in 2014, the most in nine years and 8.8 percent more than in 2013.
The Case-Shiller index covers roughly half of U.S. homes. The index measures prices compared with those in January 2000 and creates a three-month moving average. The November figures are the latest available.
Staff writer Sandra Baker contributed to this report.