Case-Shiller: Home price gains decelerate rapidly

Biggest drop in HPI since November 2012

Trey Garrison

The Case-Shiller home price index fell 0.5% in July, the biggest drop since November 2011 and the third month in a row of declines, according to the latest Case-Shiller Home Price Index.

Annualized growth printed at 6.75%, well below analyst expectations and the slowest rate of growth since November 2012.

The national Case-Shiller HPI printed at a disappointing 5.6% in the 12 months ended in July, down from 6.3% in June and well below analyst expectations.

Home prices were growing at a double-digit annualized pace as recently as February 2014.

“While the year-over-year figures are trending downward, home prices are still rising month-to-month although at a slower rate than what we are used to seeing over the past couple of years,” said David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices.

The 10-city home price index grew just 6.7% in the year ended in July. The 20-city price index was also up 6.7%.

“The housing market has been giving us a lot of mixed signals lately. New home sales are up big, but existing home sales are down. Case-Shiller and other housing indices continue to show a general slowdown in home price appreciation, even as some local markets remain very hot. Inventory is up, but sales volume is down,” saidZillow chief economist Stan Humphries. “What all of this is really telling us is that the housing market we’re beginning to see emerge from the ashes of the recession is one that is finally transitioning away from being fueled by internal factors like low mortgage interest rates, low inventory and low prices.

“Instead, it is increasingly being fueled by more traditional outside factors like wage growth, an improving job market and household formations. This transition won’t be seamless, however, and I expect to see more conflicting data as the recovery continues,” Humphries said.

The national HPI increased 0.2% in July, while the 10-city and 20-city HPI composite dropped 0.5%.

“The slower pace of home price appreciation is consistent with most of the other housing data on housing starts and home sales,” Blitzer said. “The rise in August new home sales – which are not covered by the S&P/Case-Shiller indices – is a welcome exception to recent trends.”

Cities in the South and West, the two largest housing markets, saw the biggest price drops and are still seeing the bulk of the price increases today.

“Slow but steady is this year’s theme when it comes to home price increases,” said Quicken Loans vice president Bill Banfield. “Unless we see a significant change in the economy, I don’t see this changing in the near future.”

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