Is the Strongest Part of the Housing Recovery Over?
The strength of the housing recovery continues to be closely monitored as home prices continue to rise, but at a slower pace. According to the latest Federal Housing Finance Agency report, home prices increased 1.2 percent in the fourth-quarter of 2013, representing the tenth consecutive quarterly gain.
The House Price Index has not logged a quarterly decline since 2011, but has slowed over the past three quarters. The index gained 1.8 percent in the previous quarter, and 2.3 percent in the second-quarter of 2013. On a monthly basis, home prices rose 0.8 percent in December from November when seasonally adjusted, and are at their best level since May 2005. The FHFA index is based on single-family homes with mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.
“Home price appreciation in the fourth-quarter was considerable, but more modest than in recent periods,” said FHFA Principal Economist Andrew Leventis. “It is too early to know whether the lower quarterly growth rate represents the beginning of more normalized price appreciation patterns or a more significant slowdown.”
As the chart below shows, the advance in December was led by a 14.9 percent surge in the Pacific region (Hawaii, Alaska, Washington, Oregon, and California) year-over-year. Prices in the Mountain region jumped 12.6 percent, and the South Atlantic region gained 8.4 percent from a year earlier. The Middle Atlantic was the weakest region with a yearly gain of only 2.1 percent.
Other indicators also point to a slowing housing market. In a separate report, the S&P/Case-Shiller Home Price index of property values in 20 cities increased 13.4 percent in December from a year earlier, down from 13.7 percent in the year ended in November.
“The S&P/Case-Shiller Home Price Index ended its best year since 2005,” says David M. Blitzer, Chair of the Index Committee at S&P Dow Jones Indices. “However, gains are slowing from month-to-month and the strongest part of the recovery in home values may be over. Year-over-year values for the two monthly Composites weakened and the quarterly National Index barely improved. The seasonally adjusted data also exhibit some softness and loss of momentum.”
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