The rate at which home prices are increasing appears to be slowing down, according to the latest Case-Shiller National Home Price Index. Fewer than half of the cities tracked by the organization posted price increases on an unadjusted basis in October, with annual readings also showing price gain slowdowns.

The Case-Shiller National Home Price Index, which covers all nine U.S. census divisions, reported a 5.5 percent annual gain in October, which is unchanged from the year-over-year reading in September. This is noteworthy because the index had not been below 6 percent in twelve months until it fell to 5.7 percent in August. With another decrease in September and no reported change in October, this indicates price gains may be tempering over the longterm. Before adjusting for seasonal market shifts, the National Index managed a 0.1 percent month-over-month increase for October and .05 percent after the adjustment.

City Composite Breakdown

Case-Shiller found that the 10-City Composite was up year-over-year by 4.7 percent, down from 4.9 percent the previous month.

The 20-City Composite posted a 5.0 percent annual change, 0.2 point below the reading for September.

On an unadjusted basis, neither composite reported any change for October; however, after seasonal adjustment, the 10-City Composite was up 0.5 percent and the 20-City Composite increased 0.4 percent.

Nine out of 20 cities reported increases before seasonal adjustment, while 18 of 20 cities reported increases afterward.

Notable Cities

Seattle posted surprising data, as for the first time in recent memory, it was not among the fastest appreciating cities. Las Vegas earned the top rank of fastest appreciating city with a 12.8 percent pace, followed by San Francisco, which posted a 7.9 percent gain. New to the ranking was Phoenix, which posted a 7.7 percent increase in home price appreciation. Month-over-month home prices in Seattle fell for the second consecutive month and its annual price gain increase is now 7.3 percent. Six out of the 20 cities reported greater price increases in the year ending October 2018 versus the year ending September 2018.

Affordability Concerns

“Home prices in most parts of the U.S. rose in October from September and from a year earlier,” said David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones. “The combination of higher mortgage rates and higher home prices rising faster than incomes and wages means fewer people can afford to buy a house.”

Blitzer went on to say home prices have risen 54 percent–40 percent excluding inflation–since they bottomed out in 2012.

“Reduced affordability is slowing sales of both new and existing single-family homes,” said Blitzer. “Sales peaked in November 2017 and have drifted down since then.”

Blitzer also acknowledged Las Vegas’ somewhat rags-to-riches story of having been one of the hardest-hit cities after the Great Recession but is now seeing rapid home price gains.

“The largest gains were seen in Las Vegas where home prices rose 12.8 percent in the last 12 months, compared to an average of 5.3 percent across the other 19 cities. This is a marked change from the housing collapse in 2006-12 when Las Vegas was the hardest hit city with prices down 62 percent. After the last recession, Las Vegas diversified its economy by adding a medical school, becoming a regional center for health care, and attracting high technology employers. Employment is increasing 3 percent annually, twice as fast as the national rate.”

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