Home prices in 20 U.S. cities rose at a slower pace in the year ended in October, putting the market on better footing heading into 2015.
The S&P/Case-Shiller index of property values increased 4.5 percent from October 2013, the smallest gain in two years, after rising 4.8 percent in the year ended in September, a report from the group showed today in New York. The median projection of 24 economists surveyed by Bloomberg called for a 4.4 percent advance. Nationally, prices rose 4.6 percent after a 4.8 percent gain in the year ended in September.
In the Buffalo Niagara region, which is not included in the Case-Shiller index, the average price of a home rose 5.8 percent, to $155,010, in October compared to October 2013. The median price – half sold for more and half sold for less – was up just 0.8 percent, to $125,025, according to the Buffalo Niagara Association of Realtors.
While smaller increases nationally will help put ownership within reach of more Americans as the job market improves and wage gains accelerate, prices are still up 25 percent from the depths reached following the recession. That rebound in property values has helped repair homeowners’ finances, which is contributing to gains in consumer confidence and spending that are driving the economic expansion.
“As you look forward, we’re considering a housing market that should be a more normal housing market, which means driven by the pace of income and other aspects of affordability,” said Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York, who correctly projected a slowing in home price appreciation. “Price appreciation should slow to fall more in line with the growth in income.”
Home prices in the 20-city index, adjusted for seasonal variations, increased 0.8 percent in October from the prior month, the biggest gain since March.
It exceeded the Bloomberg survey median that projected a 0.4 percent advance. Unadjusted prices dropped 0.1 percent.
The year-over-year gauge, based on records dating back to 2001, provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.
While the year-to-year returns are cooling, more cities are starting to show a reacceleration, which bodes well for next year, according to the report.
Twelve cities experienced smaller year-to-year gains in October compared with the prior month, down from 18 in September and 20 in August. The eight cities that saw prices rise faster in October included San Francisco, Denver and Tampa, Florida.
“We are seeing hints that prices could end 2014 on a strong note and accelerate into 2015,” David Blitzer, chairman of the S&P index committee, said in a statement.
All 20 cities in the index showed a year-over-year gain, led by a 9.5 percent climb in Miami and a 9.1 percent advance in San Francisco.
Cleveland showed the smallest increase, with prices rising 0.9 percent.
Borrowing costs still hovering near record lows may help draw more buyers into the market.