Home prices in the U.S. rose at a slower pace for the fifth consecutive month, yet another sign that the housing market is cooling down.
Standard & Poor’s said Tuesday that its S&P CoreLogic Case-Shiller national home price index reported a 5.8% annual gain in August, down from 6% in the previous month. It is the first time in a year that annual gains fell below 6%. The 20-City Composite posted a 5.5% year-over-year increase, down from 5.9% in July — substantially lower than analysts’ expectation of 5.8%.
“Following reports that home sales are flat to down, price gains are beginning to moderate,” said David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in a press statement. “Other housing data tell a similar story: prices and sales of new single family homes are weakening, housing starts are mixed and residential fixed investment is down in the last three quarters.”
Existing home sales fell 3.4% in September from August to the lowest level since November 2015, according to the National Association of Realtors. New home sales fell to a near two-year low in September and three prior months of sales was revised lower caused by higher interest rates and rising prices. The housing market has been losing its momentum since July.
Higher interest rates will continue to play a crucial role in housing affordability. The Federal Reserve raised interest rates three times this year and is expected to raise rates again in December and up to four times in 2019.
While home price growth is slowing down, prices are still high and experts say it will take some time for it to become a buyers’ market. “Rising prices may be pricing some potential home buyers out of the market, especially when combined with mortgage rates approaching 5% for 30-year fixed rate loans,” said Blitzer.
Las Vegas led the 20-City Composite in terms of annual price gains for the third straight month. In August, Las Vegas posted a 13.9% year-over-year price increase, followed by San Francisco with a 10.6% increase and Seattle with a 9.6% increase. August was the first month since September 2016 that Seattle, the hottest real estate market of 2017, did not post a double digit increase in home price growth.
Amanda Fung is an editor at Yahoo Finance.