Numbers count. They matter to bankers and to prospective homebuyers, sellers, and real estate professionals. Here’s my take on the key numbers on the housing market this week.
The numbers: Home appreciation slowest in 14 months
Home price appreciation continues to slow, according to the S&P/Case Shiller housing indices released July 29. S&P/Case-Shiller’s 20-City Composite Index rose 9.3% in May, down from almost 11% the prior month. It was the slowest price appreciation in 14 months.
Five Western cities were among the nine cities that posted double-digit year-over-year increases in May. The nine were: Las Vegas (16.9%), San Francisco (15.4%), Miami (13.2%), San Diego (12.4%), Los Angeles (12.3%), Detroit (11.9%), Atlanta (11.2%), Tampa (10.2%) and Portland (10.0%).
What counts: I believe moderate appreciation is a good thing for home buyers and for sellers. We all want our home values to climb, obviously, but if it is too slow, it can discourage buying. Too fast, and it can encourage speculators and can create housing bubbles. When prices were rising rapidly last year, I heard stories of prospective sellers who chose to hold off in the hopes of bigger gains in the future. What I told people was at the same time your home price is rising, any place you hope to buy is probably rising as well, so you may be shooting yourself in the foot holding out for dramatically higher prices.
Moderate price appreciation should be welcome news. If you’re a seller, a real estate agent should be able to help you determine a realistic asking price given where the market is at now. If you’re a prospective buyer, try thinking about potential slower appreciation in the future and what that means for the offer you make — and for your longer-term financial goals if your home has a single-digit rate of appreciation versus the red-hot double-digit pace of recent years.
The numbers: Pending home sales slip
Pending home sales in June slipped 1.1% from May and were down 7.3% from a year earlier, according to the Pending Home Sales Index released July 28 by the National Association of Realtors (NAR). Regionally, pending home sales were down in June compared to May in the Northeast and the South, and rose modestly in the Midwest and West.
What counts: The pending home sales report may reflect what we saw last week: Existing home sales rose and new home sales slipped in June, suggesting there’s more activity in existing homes. New housing construction has been slowed in some areas by supply and labor shortages, and slower construction can translate to lower new home sales.
This existing-versus-new home divergence has me thinking about the pros and cons of new and existing homes. When you start house hunting, it is helpful to clarify if you want a new home or an existing home. Like a used car, an existing home can come with issues, but they can also have the charm of older features and the character that comes with an established neighborhood.
If you choose a new home, you may get to pick some of the design elements and features of your house, but it may be in a development where trees and other landscaping features have not matured. Also, some new developments come with homeowners association fees to maintain common areas and services.
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