Home prices are rising, but the gains are shrinking, since fewer buyers are able to afford the homes available for sale.
Nationally, prices rose 4.3 percent annually in January, down from the 4.6 percent gain in December, according to the S&P CoreLogic Case-Shiller price index. The 10-city composite rose 3.2 percent, down from 3.7 percent in the previous month. The 20-city composite gained 3.6 percent year over year, down from 4.1 percent in December.
"The last time it advanced this slowly was April 2015. In 16 of the 20 cities tracked, price gains were smaller in January 2019 than in January 2018," said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. "Only Phoenix saw any appreciable acceleration. Some cities where prices surged in 2017-2018 now face much smaller increases."
In Seattle, annual price gains dropped from 12.8 percent to 4.1 percent from January 2018 to January 2019. San Francisco saw annual price increases shrink from 10.2 percent to 1.8 percent over the same time period.
Las Vegas, Phoenix and Minneapolis saw the largest annual gains among the 20 cities. Las Vegas prices were up 10.5 percent In January, Phoenix up 7.5 percent and Minneapolis up 5.1 percent.
Mortgage rates rose last year and hit a recent high of just over 5 percent on the 30-year fixed in November. Then rates began falling. The prices in January reported by Case-Shiller reflect sales closed during the previous three months, when rates were high and therefore reflect that hit to affordability.
"Since then, rates have dropped to 4.28 percent as of mid-March. Sales of existing single-family homes slid gently downward from the 2017 fourth quarter until January of this year before jumping higher in February 2019," Blitzer said. "It remains to be seen if recent low mortgage rates and smaller price gains can sustain improved home sales."