Home prices in large U.S. cities posted big gains in July, although the rapid increases may be easing, according to a leading index.
The S&P/Case-Shiller index of home prices in 20 large U.S. cities, released today, jumped 1.8 percent from June and 12.4 percent from July 2012. All 20 cities tracked saw gains over the month, but 15 of the cities saw the pace slow from June.
“More cities are experiencing slow gains each month than the previous month, suggesting that the rate of increase may have peaked,” David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a statement.
Prices rose fastest in Las Vegas, which saw annual gains of 27.5 percent.
The housing recovery began last year as traditional buyers and deep-pocketed investors rushed into the market looking for bargains amid low prices and historically low mortgage rates. What they found were few homes for sale as the rate of foreclosures plunged. Bidding wars ensued, sending prices swiftly upward and sparking concerns some markets had become overheated.
Lately there have been signs the market has cooled slightly as mortgage rates have risen and more homes have become available for sale in many markets.
The Case-Shiller index, created by economists Karl Case and Robert Shiller, is widely considered the most reliable read on home values. The housing index compares the latest sales of detached houses with previous sales and accounts for factors such as remodeling that might affect a house’s sale price over time.
Mortgage rates, which have increased more than 1 percentage point since May, remain a wild card for the recovery, potentially driving more to close deals sooner, fearful rates will climb even higher. But eventually that could reduce demand as housing becomes more expensive.
Rising rates have caused mortgage applications to drop since May, Blitzer said.
The Federal Reserve’s announcement last week that it will not start tapering its massive stimulus program could hold down rate increases for the moment, but economists expect that check to be temporary.
Blitzer said the Fed’s decision “may have only a limited, though favorable, impact on housing.”