As the following chart illustrates, America’s house prices have been rising since 2012, but over the past year, the price gains have been shrinking due to higher mortgage rates and a general overheating of prices in most metropolitan markets.
In fact, home prices in February posted their smallest gains in six and a half years.
The explanation behind this mini-slump in house prices seems to be that fewer families can afford to pay the market prices.
Home prices are still increasing faster than increases in average hourly earnings, making it more difficult for many people to afford to buy a home. In April, average hourly earnings were increasing at a 3.2% year over year rate, still lower than house price increases.
According to the S&P Case-Shiller price index, national house prices rose 4% y/y in February compared with a 4.2% gain in January.
House prices in the 10-city composite rose 2.6% in February compared to 3.1% in the previous month, while the 20-city composite prices increased by 3% in February.
On February 14 of the 20 cities reported monthly, seasonally adjusted price increases, but only one city had a stronger annual price increase than recorded in January.
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