Will Softening Home Prices Make You Want To Invest In A Home?

The rising tide in home prices may at last be slowing down, according to the S&P Case-Shiller index.  Economists believe the index data indicates demand for housing is tightening, and should serve as a reminder for sellers that listing prices must stabilize in 2014.

The Case-Shiller index measures net changes in prices across 20 of the largest metropolitan communities in the US.  Looking at the numbers from an annual perspective, 14 major cities saw higher home values near the end of 2013 compared to the close of 2012.  However, 11 of those same regions posted lower average prices at the close of November 2013 versus October 2013.

The monthly decline is noteworthy as it marks the first time in 10 months that prices moved in a negative direction.  The slump comes at the end of a very strong year for housing as demand for homes improved alongside aspects of the economy.

Net new jobs across much of the country averaged around 200,000 per month throughout the third quarter of 2013.  As the unemployment rate declined, potential buyers were given the boost of confidence necessary to invest in homes. 

Demand was also supported by changes in posted mortgage rates, which reached new record lows in May last year.  Mortgage rates then began rising throughout the summer, as the Federal Reserve announced cutbacks to the stimulus program.  The surge in loan costs inspired many buyers to get a mortgage while rates remain affordable.

David Blitzer, Chairman of the committee that oversees the Case-Shiller index, expects price points for December, January, and onward will continue to soften as borrowing costs rise alongside weaker demand.

“While housing will make further contributions to the economy in 2014, the pace of price gains is likely to slow during the year.”