Home prices continued to rise in April, but at a slower annual pace than in March, according to the latest S&P/Case-Shiller Home Price Indices.
The Case-Shiller 20-City Composite showed prices rising 1.1 percent from March to April, and 10.8 percent from a year ago, with 19 of 20 cities seeing their annual gains slow in April compared to March.
“Although home prices rose in April, the annual gains weakened,” says David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, in a statement. “Overall, prices are rising month to month but at a slower rate.”
Sunbelt cities registered year-over-year increases close to 30 percent last year, but now Las Vegas (18.8 percent), Los Angeles (14 percent), Phoenix (9.8 percent), San Diego (15.3 percent) and San Francisco (18.2 percent) are all showing annual gains below 20 percent, he noted.
Monthly appreciation remained strong, despite the cooling in annual increases, Blitzer said.
Five cities — Atlanta, Boston, Chicago, San Francisco and Seattle — reported monthly gains of 2 percent or more, while Dallas and and Denver gained 1.6 percent, continuing to set new peaks.
Home prices in Boston and Charlotte are within 10 percent of their peaks, Blitzer said.
The deceleration in home prices is a positive development, heralding a return to a more stable market, some experts say.
Home prices are still undervalued by 3 percent, but should be in line with long-term fundamentals by the last quarter of 2014 or the first quarter of 2015, according to Trulia Chief Economist Jed Kolko.
“The good news for bubblephobes is that price gains are now slowing down while prices still look (slightly) undervalued,” Kolko said. “We’d be at greater risk of heading toward a bubble if price gains were still accelerating, but they’re not.”
That’s not to say that there aren’t any markets where homes are overvalued. Orange County, California, for example, is 17 percent overvalued, representing the bubbliest market in the U.S., according to Trulia.
But that degree of price inflation pales in comparison to the level seen during the bubble. Orange County was 71 percent overvalued in the first quarter of 2006, Kolko said.