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Real Estate Market Commentary - January 2015
by Peter L. Zachary, MAI, MRICS

The Business Day section of the New York Times on December 31, 2014 had an article entitled "Growth in the US Home Prices at Slowest Rate since 2012." The article stated: Home prices in the United States rose in October at a slightly slower pace, as real estate sales have fallen and affordability has increasingly become a challenge for potential buyers. The Standard & Poorís/Case-Shiller 20 city home price index increased 4% on October from the 12 months previous. The figure reported on Tuesday shows the 11th straight month of decelerating price gains and had the smallest gain since October 2012. Also on Tuesday, a private survey showed that American consumers were feeling more confident about the economy. The Conference Board said its consumer index climbed to 92.6 this month from a revised 91 in November.

The 2014 slowdown in homesí price growth comes after surging double digit increases for much of 2013. Home values climbed as the market recovered after bottoming out in 2011 following the housing bust and the recession. But home prices have outpaced lackluster wage growth, leaving many potential buyers unable to afford homes and causing both sales and price growth to stall this year. The recent decline in in mortgage rates has yet to bring more buyers into the market. Simultaneously, there are fewer distressed properties and bargains coming onto the market, which attract investors as buyers. All of that has occurred despite and improving American economy that has generated 2.65 million new jobs so far this year, as the unemployment rate dropped to 5.8% from 6.7% at the start of 2014.

Prices barely budged over the past 12 months in Cleveland, up 0.9%; Chicago, up 1.9%; New York, up 2.1%; and Washington, up 2.2%. Still there are signs that broader improvements in the American economy may be causing prices to rise faster in some cities. Compared with September, eight cities reported stronger year-over-year price growth in October. They include San Francisco, ip 9.1%: Denver, up 7.2%; and Tampa, up 6.1%.

We are seeing hints that prices could end 2014 on a strong note and accelerate into 2015, said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. The Case-Shiller index which covers roughly half of United States homes, measures prices compared with those in January 2000 and creates a three month moving average. The October data is the latest available.. Stan Humphries, chief economist at the real estate data firm Zillow, noted that slower price growth should ultimately lift the economy. When prices rise at levels close to wages, more people are usually able to buy a home.

"A slower-moving housing market is inherently more stable, more balanced between buyers and sellers and more sustainable over the long term." Mr. Humphries said. Buying could be helped by average 30-year mortgage rates that are staying close to a 19 month low. Rates nationwide averaged 3.83% last week, according to Freddie Mac.

More to come next month. Read previous Real Estate & Housing Market News.

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