WASHINGTON (AP) — U.S. home price growth slowed in October, a likely consequence of higher mortgage rates having worsened affordability and causing sales to fall.
The S&P CoreLogic Case-Shiller 20-city home price index rose 5 percent from a year earlier, down from an annual gain of 5.2 percent in September, according to a Wednesday report.
Home prices have dropped as would-be buyers are struggling to afford homes. Prices have consistently climbed faster than wa0ges, a challenge that was overcome until last year by historically low mortgage rates. But borrowing costs began to rise last year after President Donald Trump cut taxes by increasing the budget deficit and the Federal Reserve hiked interest rates.
“Prospective home buyers can no longer sustain the demand that propped up aggressively rising home prices,” said Cheryl Young, a senior economist with the real estate firm Trulia. “With little sign that home buyers’ purchasing power will strengthen into 2019, expect the housing market to stagnate well into next year.”
The Las Vegas metro area reported the strongest price growth of 12.8 percent. San Francisco saw a 7.9 percent price increase, while home prices rose 7.7 percent in Phoenix.
The report reveals a stunning comeback for Las Vegas, which was one of the epicenters of the housing bust that caused the U.S. economy to collapse into a recession at the end of 2007. The Nevada tourist destination has found new ways to grow as the market began to recover.
“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” said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “Employment is increasing 3 percent annually, twice as fast as the national rate.”
But nationally, sales have generally stagnated or fallen.
The National Association of Realtors reported earlier this month that sales of existing homes tumbled 7 percent in November from a year ago.
Consumers may get some temporary relief as mortgage rates have declined in recent weeks amid the stock market sell-off. The average rate on the benchmark 30-year, fixed-rate mortgage fell to 4.62 percent last week from nearly 5 percent in early November, according to mortgage buyer Freddie Mac.
Still, average rates are up from 3.94 percent a year ago.