Home prices in 20 U.S. cities rose at a slower pace in the year ended May, keeping more properties within reach for prospective buyers.
The S&P/Case-Shiller index of property values increased 4.9 percent from May 2014 after rising 5 percent in the year ended in April, the group said Tuesday in New York. The median projection of 28 economists surveyed by Bloomberg called for a 5.6 percent year-over-year advance. Nationally, prices climbed 4.4 percent.
The slower pace of appreciation may give younger or first-time buyers an easier point of entry into the market, especially as wages have seen little growth for much of the economic expansion. It also gives Federal Reserve officials room to be patient as they consider raising interest rates, which hasn’t occurred since 2006.
The price gains portray “a housing market that’s growing quite healthily but isn’t overheating,” David Sloan, a senior economist at 4Cast Inc. in New York and one of the best forecasters of the Case-Shiller index over the past two years, according to data compiled by Bloomberg. That’s “probably a fairly good picture as far as the Fed is concerned.”
Economists’ estimates in the Bloomberg survey ranged from gains of 5 percent to 5.8 percent. The S&P/Case-Shiller index is based on a three-month average, which means the May figure was also influenced by transactions in April and March.
All 20 cities in the index showed a year-over-year increase, led by gains of 10 percent in Denver and 9.7 percent in San Francisco. Washington showed the smallest increase at 1.3 percent.
The year-over-year gauge 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.
Home prices in the 20-city index adjusted for seasonal variations decreased 0.2 percent in May, the biggest drop since July 2014, after being little changed the month before. The Bloomberg survey median called for a 0.3 percent gain.
Property prices fell in 10 of 20 U.S. areas in May from a month earlier, led by a 0.9 percent drop in Chicago. Adjusted prices rose in eight cities, led by Las Vegas, and were little changed in two others.
Housing has been making gradual progress this year, with steady job gains fueling the appetite for and wherewithal to buy homes. The economy has added 1.3 million jobs this year, while at 5.3 percent the unemployment rate is the lowest since April 2008.
That helped closings on existing homes climb to a 5.49 million annualized rate in June, the most since February 2007, the National Association of Realtors said last week. Still, the improvement has been stop-and-go. Sales of new U.S. homes, considered a timelier, yet more volatile, gauge of the housing market, fell to a 482,000 annualized pace, the weakest since November, according to Commerce Department figures.
Historically low mortgage rates may make rising home prices easier to swallow for some prospective buyers. The average rate for a 30-year fixed mortgage was 4.04 percent in the week ended July 23, according to data from Freddie Mac. It compares with the 6.06 percent average in the five years before the last recession began.