U.S. home prices rose at the slowest rate in nearly seven years in June but economists are still not expecting a crash in prices as market fundamentals remain solid.
Average national home prices increased 3.1% in the year ending in June, down from a 3.3% annual pace the prior month, according to the S&P CoreLogic Case-Shiller National Home Price Index.
The 10-City Composite annual increase came in at 1.8%, down from 2.2% in May, while the 20-City Composite rose 2.1% annually, down from 2.4% in the previous month.
“While housing has clearly cooled off from 2018, home price gains in most cities remain positive in low single digits,” S&P Dow Jones Indices Director Philip Murphy said in a news release. “Therefore, it is likely that current rates of change will generally be sustained barring an economic downturn.”
The June price gain was half that of a year ago but Forbes noted that “By historical standards this pace of price appreciation is actually quite normal. It just feels low compared to the extreme price growth seen over the past few years.”
“Most of the market fundamentals that drive housing performance are still in solid shape,” Forbes added, citing respectable job growth, low unemployment, and attractive mortgage rates.
The Federal Housing Finance Agency House Price Index, also released Tuesday, showed that home-price growth has decelerated for the last 15 months, with prices rising just under 5% in the second quarter compared with a year earlier.
Lawrence Yun, chief economist for the National Association of Realtors, said he is “expecting re-acceleration in home price gains in the upcoming months, as the market has been shifting towards higher demand due to lower mortgage rates and reduced supply as home builders constructed fewer homes this year compared to the last year.”
“We expect some positive effect of the mortgage interest rate decline on housing demand as well as home price appreciation given that rates have fallen a full percentage point since the end of 2018 to below 4% in August,” Lynn Fisher, FHFA’s senior advisor for economics, said.