NEW YORK CITY-The S&P/Case-Shiller Home Price Indices finished their best year since 2005 on a downward note. S&P Dow Jones Indices said Tuesday that the indices for this past December show that gains in home prices have begun to lose momentum.
Notwithstanding the strong showing home prices made throughout 2013, “gains are slowing from month-to-month and the strongest part of the recovery in home values may be over,” says David M. Blitzer, who chairs the index committee at S&P Dow Jones Indices. “Year-over-year values for the two monthly composites”—10-city and 20-city—”weakened and the quarterly National Index barely improved. The seasonally adjusted data also exhibit some softness and loss of momentum.”
In December, the 10-city composite remained relatively unchanged from the month prior, while the 20-city composite showed its second consecutive monthly decline of 0.1%. On a Y-O-Y basis, the 10-City and 20-City composites posted gains—13.6% and 13.4%, respectively—but both are approximately 30 basis points lower than November’s results.
Blitzer adds that recent economic reports suggest “a bleaker picture for housing.” Sales of existing homes fell 5.1% in January from December to “the slowest pace in over a year,” for one thing. Further, he says, “Permits for new residential construction and housing starts were both down and below expectations.”
While some of that softening can be blamed on the cold weather that has prevailed across much of the US this winter, Blitzer adds that “higher home prices and mortgage rates are taking a toll on affordability.” Meanwhile, default rates on mortgages, as measured by the S&P/Experian Consumer Credit Default Index, have returned to pre-crisis levels, “but bank lending standards remain strict.”
Looking at individual markets in the Case-Shiller indices, Chicago showed its highest Y-O-Y return, 11.3%, since December 1988. With a 10.2% return, Dallas similarly recorded its largest annual gain since it first appeared on the indices in 2000. Phoenix ended a 26-month streak of consecutive gains—which included a run in 2012 as the leader in the recovery—with a 0.3% decline in December.
The best performing cities last year, according to S&P Dow Jones Indices, were Las Vegas, Los Angeles and San Francisco, each of which posted gains of more than 20%. The Sun Belt markets, with the exceptions of Dallas, Miami and Tampa, saw lower annual rates in December when compared to their November numbers. Only six cities in the indices—Dallas, Las Vegas, Miami, San Francisco, Tampa and Washington, DC—posted monthly gains during December.
“The housing recovery continues, but perhaps not as vigorously as it did in the first half of last year,” Michael Feroli, chief US economist at JPMorgan Chase & Co., told Bloomberg on Tuesday. “Even so, appreciation trends still look pretty good even though they may not be as strong as they were.”