A steep gain in home prices in many markets that helped lift millions of Americans out of the red on their mortgages is now markedly slowing, with new data from the Standard & Poor’s/Case-Shiller national home price index on Tuesday showing that the annual growth in prices had eased in March to 10.3 percent, from the previous year’s increase of 11.4 percent.
But analysts said that the softening of price gains, rather than a worrisome trend, may actually be welcome news. Double-digit increases cannot go on forever, and many economists are using words like “sustainable” and “stable” to describe the slowdown, saying the market is becoming healthier.
Foreclosures make up a smaller percentage of sales, and the higher prices have caused investors to back off, leaving the bigger question of whether housing is affordable and mortgages are accessible to average families that want to buy. First-time home buyers still make up less than 30 percent of the market, according to the National Association of Realtors, while the number of all-cash buyers — not just investors, but older people who are downsizing after the sale of a larger home — has remained elevated.
Interactive Graphic: Home Prices in 20 Cities
Those factors will help curb any potential new bubbles, said Mark H. Goldman, a real estate expert at San Diego State University. “Here in San Diego, we have a real shortage of inventory, yet prices are softening,” he said, adding that houses in the area may have been priced too aggressively. “A big factor on home price appreciation is affordability.” Prices in San Diego rose 18.9 percent between March 2014 and March 2013, according to Case-Shiller. More moderate increases may give buyers’ incomes a chance to catch up.
Of the 20 cities that Case-Shiller tracks individually, all had double-digit price increases in that time period except Boston, Charlotte, Cleveland, Denver, New York and Washington, which had single-digit increases. In some cases, the cities hit hardest in the housing bust had the biggest gains. Las Vegas, where home prices rose 21 percent, led the list. Cities where demand has accelerated and housing supply is sharply limited by geography and other factors, like San Francisco, also posted large gains. Prices soared there by 21 percent, according to the measure.
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