United States: Home prices continue to cool in January
March 26, 2019
Home prices continued to slide in January, softening for the tenth month in a row. On a month-on-month basis, the S&P/Case-Shiller 20-city composite home price index fell 0.2% in January, matching December’s print but missing expectations of a flat reading. When adjusted for seasonal factors, house prices grew 0.1% from the previous month, down from 0.2% increase registered in December.
In annual terms, home price growth tumbled from 4.1% in December to just 3.6% in January, the lowest reading since September 2012. Las Vegas, Phoenix and Minneapolis registered the largest year-on-year price increases, respectively, while momentum continued to fade in previously-hot markets such as San Francisco, Los Angeles and Seattle. Overall, 16 out of the 20 cities in the index registered slower annual price growth in January.
Looking ahead, cooling domestic growth and ample supply in select areas should keep price pressures relatively muted. On the other hand, the recent policy shift from the Federal Reserve, which has now halted its schedule of hikes and is likely to keep its policy rate unchanged throughout 2019, will help maintain mortgage rates lower than previously expected, which will improve affordability for homebuyers and thus support demand.
In light of this, David Blitzer, managing director at S&P Dow Jones Indices, noted:
“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. Sales of existing single-family homes slid gently downward from the 2017 fourth quarter until January of this year before jumping higher in February 2019. […] It remains to be seen if recent low mortgage rates and smaller price gains can sustain improved home sales.”
Author: Joffrey Simonet, Economist