Recent indicators show that the housing market is slowing, despite the market’s strong run in the first half of the year with home prices steadily growing in July. The S&P/Case-Shiller Home Price Index, covering existing single-family homes across the U.S., rose 4.7% in the 12 months ending in July, overcoming June’s 4.5% increase.
However, indicators of the housing market’s strength have been mixed in recent weeks. Price growth remains strong, but the pace of sales of existing homes slumped in August. Economists said this murky national picture reflects disparities among housing markets across the country, which vary with the health of local economies.
“We got so used to this being a national story because the crash was extremely national” as was the increase in prices as the market recovered, said Svenja Gudell, chief economist at real-estate website Zillow. “Now that we’re starting to slow down we can see these trends emerging that are very local.”
Markets in the western part of the country are stronger than those in the east, for the most part. Most metropolitan areas west of the Mississippi saw price gains from June to July, while most cities east of that line saw declines. After seasonal adjustment, Chicago saw prices decline 1.2% and the New York area saw prices decline 0.5%. Prices meanwhile grew 0.8% seasonally adjusted in San Diego. Over time, the divide between California cities and more eastern cities has become even more apparent. Home prices in Los Angeles, San Francisco and San Diego have more than doubled since January 2000. In Detroit, prices have grown just 3% and in Cleveland just 10%, according to Case-Shiller.
The slowing of the housing market is seen by economists as healthy. They note that prices in many markets were increasing faster than incomes, making it difficult for younger buyers to afford to buy a home. Still, Selma Hepp, chief economist at Trulia, noted that prices for the most affordable homes continue to rise sharply, even as gains on the luxury end have slowed. Prices at the lowest price tier in Denver increased 16% and in Atlanta they increased 12% in the year ending in July, she said.
“Buyers are worried about too-high prices and are more cautious about making offers,” said Karen Krupsaw, vice president of real-estate operations at Redfin. “We’re seeing that sellers are getting the memo, as more people are dropping their prices in the past few weeks.”
Do you feel the housing market is slowing in California? What do you make of the California prices that have more than doubled?
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