Charlotte-area yearly home price gains slowed in May for the first time in 11 months – a sign that the local housing market might be cooling off.
The closely watched Standard & Poor’s Case-Shiller indexes, released Tuesday, showed prices of existing Charlotte homes increased 7.1 percent from a year ago, down from April’s year-over-year increase of 7.3 percent.
On a national level, average home prices have returned to spring 2004 levels, according to Case-Shiller. Across 20 U.S. cities, May home prices rose 12.2 percent, their largest yearly increase since March 2006, but remain about 25 percent below June-July 2006 peaks.
While the data show the local and national housing sector is healthier than during the depths of the downturn, David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said U.S. home price growth isn’t expected to stay at current levels.
“I don’t think we’re going to sustain double-digit annual rates of increase over the long haul,” he said in a phone interview. “Over the next year to year and a half, the rate of increase is going to slow down for almost all the cities.”
In Charlotte, home prices have been rising as inventory shrinks and brokers report some listings resulting in competing bids. A year ago, Charlotte brokers say, competing bids would have been virtually unheard of.
Existing Charlotte-area homes are also selling faster than they were a year ago, according to the Charlotte Regional Realtor Association. In June, it took 93 days on average for a home to sell, a decline of 16 percent from June 2012.
Despite signs of a strengthening market, some Charlotte sellers have had to lower prices this summer after failing to attract buyers.
Such reductions are helping to keep price increases in check.
Mark DuPont, 68, listed his home in the Downs Grant neighborhood for $247,500 July 6, but has since slashed that to $237,500.
“It was way overpriced for the area,” DuPont said Tuesday. “I really thought I would get more interest than I did.”
After lowering the price and putting the home on the local multiple listing service, he’s getting more inquiries, he said. Since last week, there have been five showings but no offers, he said.
“I think it will sell,” he said.
Holly Corbit also had to lower the price of the Cameron Wood home she owns with her husband. The couple listed it June 2 at $230,000 after putting in new appliances and making other upgrades to the home, which was built in 1988.
“We thought we were competitively priced within our neighborhood,” she said.
They received no offers and, worried that there would be less interest in buying homes after the summer ends, put it on the multiple listing service and dropped the price to $215,000.
“We were concerned about bringing it down significantly,” she said. “But we said, ‘Well, we’ve got to get offers.’ ”
About four days later, a flurry came in, she said. The house is now under contract.
As to why the home didn’t sell at $230,000, she speculated that buyers are still trying to find a bargain.
“They’re just trying to chisel down as low as they can go,” she said.
Rising mortgage rates
Rising mortgage rates are also creating uncertainty about the housing market. According to Freddie Mac, the government-controlled mortgage-finance company, the average rate for a 30-year, fixed-rate mortgage in July is 4.37, up from 3.55 the same month last year.
On Monday, the National Association of Realtors’ chief economist said its index of pending sales dropped 0.4 percent in June from May. Lawrence Yun, the association’s economist, blamed higher mortgage rates and lower inventory of homes for sale.
In Charlotte, monthly price gains tapped on the brakes in May, according to Case-Shiller, which does not track sales of newly built homes in its indexes.
Prices rose only 0.1 percent from the month before, after a 1 percent increase from March to April.
The same trend took place in the U.S. Across the 20 cities, May prices rose 2.4 percent from April, down from a 2.6 percent rise from March to April.
Blitzer, of Case-Shiller, said the decline was not significant.
As mortgage rates go up, he said, “that will dampen housing.”
But the housing industry won’t “fall off a cliff” as a result, he said.
“It’s likely to be much more gradual. If past patterns are any indication, a lot of people will shift from fixed-rate loans to adjustable-rate loans. I don’t see any reason why we wouldn’t see it again.”
No comments, shop8admin, March 4, 2018
U.S. home prices jumped 12.2 percent in May compared with a year ago, the biggest annual gain since March 2006. The increase shows the housing recovery is strengthening.
The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday also surged 2.4 percent in May from April. The month-over-month gain nearly matched the 2.6 percent increase in April from March – the highest on record.
The price increases were widespread. All 20 cities showed gains in May from April and compared with a year ago.
Prices in Dallas and Denver reached the highest level on records dating back to 2000. That marks the first time since the housing bust that any city has reached an all-time high.
Home values are rising as more people are bidding on a scarce supply of houses for sale. Steady price increases, along with stable job gains and historically low mortgage rates, have in turn encouraged more Americans to buy homes.
One concern is that higher mortgage rates could slow home sales. But many economists say rates remain low by historical standards and would need to rise much faster to halt the momentum.
Svenja Gudell, senior economist at Zillow, a home price data provider, said a big reason for the recent price gains is that foreclosed homes make up a smaller proportion of overall sales. Foreclosed homes are usually sold by banks at fire-sale prices.
“Typical home values have appreciated at roughly half this pace for the past several months, which is still very robust,” Gudell said.
Gudell said higher mortgage rates and a likely increase in the number of homes for sale in the coming months should slow the pace of price gains and stabilize the housing market.
The index covers roughly half of U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The May figures are the latest available. They are not adjusted for seasonal variations, so the monthly gains reflect more buying activity over the summer.
Despite the recent gains, home prices are still about 25 percent below the peaks they reached in July 2006. That’s a key reason the supply of homes for sale remains low, as many homeowners are waiting to recoup their losses before putting their houses on the market.
Dallas and Denver, the two cities that reached record highs, were not hit hard by the housing bust and therefore didn’t experience the sharp price swings like cities in Nevada, Arizona, California and Florida.
In Dallas, prices fell only 11.2 percent from their previous peak in June 2007 through February 2009. That’s far less than Las Vegas, where prices plummeted by more than half. Since bottoming out, home prices in Dallas have increased nearly 14 percent.
In Denver, prices dropped 14.3 percent from August 2006 until they also hit bottom in February 2009. Since then, they have risen 17.3 percent.
The biggest price gains are occurring in many of the states that experienced the worst housing bust.
Prices jumped 24.5 percent in San Francisco in May from a year earlier, the largest increase. Las Vegas reported the next biggest gain at 23.3 percent, followed by Phoenix at 20.6 percent. All three remain well below their peak prices.
The smallest yearly gains were in New York, at 3.3 percent, followed by Cleveland with 3.4 percent and Washington, D.C. at 6.5 percent.
Higher home prices help the economy in several ways. They encourage more sellers to put their homes on the market, boosting supply and sustaining the housing recovery. And they make homeowners feel wealthier, encouraging consumers to spend more. Banks are also more willing to provide mortgage loans when homes are appreciating in value.
Mortgage rates have surged since early May, though the increase would have had little impact on the current report. The average rate on a 30-year fixed mortgage has jumped a full percentage point since early May and reached a two-year high of 4.51 percent in late June.
Mortgage rates jumped after Chairman Ben Bernanke said the Federal Reserve could slow its bond-buying program later this year if the economy continues to improve. The Fed’s bond purchases have kept long-term interest rates low, encouraging more borrowing and spending.
In recent weeks, Bernanke and other Fed members have stressed that any change in the bond-buying program will depend on the economy’s health, not a set calendar date.
Since those comments, interest rates have declined. The average on the 30-year mortgage was 4.31 percent last week.
The Fed begins a two-day policy meeting Tuesday and could clarify its remarks further when the meeting concludes on Wednesday.
No comments, shop8admin, December 2, 2017