Home prices in 20 U.S. cities rose at a slower pace in the year ended May, keeping more properties within reach for prospective buyers.
The S&P/Case-Shiller index of property values increased 4.9% from May 2014 after rising 5% in the year ended in April, the group said Tuesday in New York. The median projection of 28 economists surveyed by Bloomberg called for a 5.6% year-over-year advance. Nationally, prices climbed 4.4%.
The slower pace of appreciation may give younger or first-time buyers an easier point of entry into the market, especially as wages have seen little growth for much of the economic expansion. It also gives Federal Reserve officials room to be patient as they consider raising interest rates, which hasn’t occurred since 2006.
“Nationally, single-family home-price increases have settled into a steady 4%-5% annual pace following the double-digit bubbly pattern of 2013,” David Blitzer, chairman of the S&P index committee, said in a statement. “Over the next two years or so, the rate of home price increases is more likely to slow than to accelerate.”
Economists’ estimates in the Bloomberg survey ranged from gains of 5% to 5.8%. The S&P/Case-Shiller index is based on a three-month average, which means the May figure was also influenced by transactions in April and March.
All 20 cities in the index showed a year-over-year increase, led by gains of 10% in Denver and 9.7% in San Francisco. Washington showed the smallest increase at 1.3%.
The year-over-year gauge provides better indications of trends in prices, according to the S&P/Case-Shiller group. The panel includes Karl Case and Robert Shiller, the economists who created the index.
Home prices in the 20-city index adjusted for seasonal variations decreased 0.2% in May, the biggest drop since July 2014, after being little changed the month before. The Bloomberg survey median called for a 0.3% gain.
Property prices fell in 10 of 20 U.S. areas in May from a month earlier, led by a 0.9% drop in Chicago. Adjusted prices rose in eight cities, led by Las Vegas, and were little changed in two others.
Housing has been making gradual progress this year, with steady job gains fueling the appetite for and wherewithal to buy homes. The economy has added 1.3 million jobs this year, while at 5.3% the unemployment rate is the lowest since April 2008.
That helped closings on existing homes climb to a 5.49 million annualized rate in June, the most since February 2007, the National Association of Realtors said last week. Still, the improvement has been stop-and-go. Sales of new U.S. homes, considered a timelier, yet more volatile, gauge of the housing market, fell to a 482,000 annualized pace, the weakest since November, according to Commerce Department figures.
Historically low mortgage rates may make rising home prices easier to swallow for some prospective buyers. The average rate for a 30-year fixed mortgage was 4.04% in the week ended July 23, according to data from Freddie Mac. It compares with the 6.06% average in the five years before the last recession began.