Residential real-estate prices climbed at a slower pace in the year through January than a month earlier, indicating momentum in the housing market may be cooling.
The S&P/Case-Shiller index of property values in 20 cities increased 13.2 percent from January 2013, the smallest gain since August, after rising 13.4 percent in the 12 months through December, the group said today in New York. The median projection of 30 economists surveyed by Bloomberg called for a 13.3 percent advance. Compared with the prior month, prices rose 0.8 percent.
Price appreciation on a year-over-year basis has eased in recent months as higher mortgage rates and unusually severe winter weather slowed demand for properties. Smaller increases in asking prices will help improve affordability, providing support for the residential real-estate market, which has been a source of strength for the economy.
“Prices are rising, even though we should see those gains moderating,” said Scott Brown, chief economist at Raymond James & Associates Inc., who correctly forecast the year-over-year gain. “You’re still talking about double-digit percentage increases, which aren’t going to be sustainable over the long term.”
Estimates in the Bloomberg survey ranged from year-over-year gains of 11.2 percent to 13.8 percent. The Case-Shiller index is based on a three-month average, which means the January figure was also influenced by transactions in December and November.
Stock-index futures held earlier gains after the figures, with the contract on the Standard & Poor’s 500 Index maturing in June rising 0.4 percent to 1,857.3 at 9:13 a.m. in New York.
Home prices adjusted for seasonal variations increased in January from the prior month after climbing 0.7 percent in December. The Bloomberg survey median called for a 0.6 percent gain.
The month-over-month price gains in cities were led by a 1.8 percent increase in San Diego and a 1.7 percent advance in San Francisco. Prices climbed in all 20 major metropolitan areas.
“The housing recovery may have taken a breather due to the cold weather,” David Blitzer, chairman of the S&P index committee, said in a statement. “Expectations and recent data point to continued home-price gains for 2014. Although most analysts do not expect the same rapid increases we saw last year, the consensus is for moderating gains.”
Unadjusted prices decreased 0.1 percent in January from the prior month after a similar decline in December. Twelve areas reported a drop in unadjusted prices, while values increased in seven cities.
The year-over-year gauge, which uses records dating back to 2001, provides better indications of trends in prices, according to the S&P/Case-Shiller group. The panel includes Karl Case and Robert Shiller, the economists who created the index.
All 20 cities in the index showed a year-over-year increase, paced by gains of 24.9 percent in Las Vegas and 23.1 percent in San Francisco. Cleveland showed the smallest increase of 4 percent.
The acceleration in prices since the end of 2012 has generated more profit for companies such as Lennar Corp. and KB Home. Miami-based Lennar, the biggest homebuilder by market value, reported net income rose to $78.1 million in the three months through February from $57.5 million a year earlier, the company reported March 20.
“In the first quarter, we have seen clear signs that volume is returning to the market even as severe weather made conditions difficult,” Stuart Miller, Lennar’s chief executive officer, said on a conference call. “We continue to believe that the fundamental drivers of improvement in the housing market remain a steadily improving economy with a slowly improving employment picture unlocking pent-up demand, while supplies remain constrained to meet that demand.”
Los Angeles-based KB Home also reported fiscal first-quarter earnings that beat estimates as it raised prices and opened communities in high-cost, land-constrained markets, such as parts of California.
As Federal Reserve officials gauge economic improvement while scaling back an unprecedented stimulus program, they’re also monitoring the effects their policies may have on interest rates. Treasury yields jumped March 19 after Janet Yellen said in her first press conference as Fed chair that rates could rise “around six months” after asset purchases end, most likely in the fall.
Policy makers also said that the recovery in housing is still slow. That may give way to a pickup as more people take advantage of borrowing costs that, while higher than a year ago, are historically low.
“There’s a lot of demographic potential there for new household formation that would ultimately generate new construction,” Yellen said after the Fed’s policy meeting. “And the level of rates I think does matter, and the fact that they’re low now is something that should serve as a stimulus to people coming back into the housing market.”
The average rate on a 30-year, fixed-rate purchase loan was 4.32 percent in the week ended March 20, up from 3.54 percent around the same time a year ago, according to McLean, Virginia-based Freddie Mac. That’s still below the 20-year average of 6.26 percent.
Beyond the recent increase in borrowing costs and declining affordability, the slowdown in housing since the middle of last year also reflects limited job growth and more recently, bad weather. February ended with its coldest final week since 2003, according to Berwyn, Pennsylvania-based weather data provider Planalytics Inc. The second week of the month was the snowiest such period since 2007.
New-home sales are projected to fall 4.9 percent to a 445,000 annualized pace in February from the month before, according to the median forecast in a Bloomberg survey before the Commerce Department’s figures later today.
Another report last week showed sales of previously owned homes fell 0.4 percent to a 4.6 million annual rate in February, the weakest level since July 2012, according to figures from the National Association of Realtors.