Home-price appreciation is slowing, a welcome trend for
potential buyers but a troubling one for homeowners still looking for relief
from underwater mortgages. Single-family housing prices rose 4.4% in the year
that ended in the second quarter, the slowest annual pace since 2012, according
to a report by National Association of Realtors.
The association found that median prices for existing
single-family homes grew year-over-year in 122 of 173 metropolitan areas it
tracked, while prices declined in 47 metro areas. Only 19 areas showed
double-digit year-over-year price increases, a substantial drop from the 37
cities that showed such increases in the first quarter.
Economists said price appreciation is slowing in part
because buyers, including investors, have become more cautious and are pulling
back from the market amid the big price gains of the past year. At the same
time, those higher prices persuaded more homeowners to put their homes up for
sale, adding inventory and reducing the urgency to buy.
Those trends are good news for potential buyers, who have
had to deal with heated competition for a relatively small number of homes on
the market in many cities as well as a near percentage-point increase in 30-year
mortgage rates since May 2013.
However, the trends serve as a warning to some owners who
bought their homes near the peak of the market and still owe more on their
mortgages than their homes are worth, said NAR chief economist Lawrence Yun. A
report from real-estate research firm CoreLogic said that at the end of
the first quarter, owners of 6.3 million homes were still underwater, or owed
more than their homes were worth.
Overall, the second quarter showed a significant divergence
in price change between metro areas and regions. While the median existing
single-family home price between the second quarters of 2013 and 2014 rose 7.3%
in the West, home prices in the Northeast fell 0.9%.
To be sure, median home prices can be skewed as the kinds of
homes being sold shift between the higher and lower ends of the market, a
factor that can have an especially strong influence on statistics from small
metropolitan areas. According to the NAR report, the most expensive housing
market in the second quarter was San Jose, Calif., where the median price was
$899,500.
Some home buyers say that they've noticed the market cool
somewhat. A broker bought an investment property for about $175,000 at the end
of June. He hopes to sell the home before the winter and that he feels there is
an increased sense of urgency to sell so he won't have to wait until the spring
home-buying season.
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