U.S. home prices increased 10.1 percent in the second quarter compared with the same time last year, according to an analysis of Case-Shiller indexes provided by CoreLogic. But the real estate analytics firm predicts that widespread increase in home prices will begin to slow down next year, rising only 5.4 percent through the first six months of 2014. Though this June, home prices were up 16 percent from their nadir in the fourth quarter of 2011.
"Prices are now rising in nearly 90 percent of metro areas, and in all metro areas with populations greater than 1 million," David Stiff, principal economist for CoreLogic Case-Shiller, said in a statement. "The strongest growth continues to be recorded in cities that were at the center of the housing bubble, but investor demand in those markets appears to be waning, meaning rapid rates of price appreciation are likely unsustainable."
Of the metro areas that felt the greatest impact from the housing bubble, Sacramento (+26 percent), Las Vegas (+25 percent) and Phoenix (+20 percent) saw the largest increase in home prices during the second quarter of 2013 versus the same period last year. Coastal California markets also exhibited strong price appreciation, including Oakland (+24 percent), San Jose (+22 percent) and Los Angeles (+20 percent), as buyers continue to jump in before increasing prices and mortgage rates substantially reduce affordability.
Purchases by first-time and trade-up buyers are increasing, though tight mortgage lending conditions and slow job-market gains are constraining demand for owner-occupied housing. Demand from investors is weakening as well, as fewer distressed properties are listed for sale and rising home prices cut into potential rental profits. At the same time, the overall supply of homes for sale is still rising in many metro areas as current homeowners take advantage of favorable seller’s markets.
"Combined with increased housing construction, expected increases in existing inventories should restrain price appreciation even if demand remains strong. Nevertheless, the rate of home price growth in the coming months will remain above its long-term average of 4.5 percent annual appreciation since 1975," Stiff added.
