Home sales in the U.S. has rallied recently as job creation accelerated, the weather improved, and mortgage rates eased.
However, prices have been cooling off.
The latest Case-Shiller data showed that the national average home price growth decelerated to just 0.2% month-over-month in April, while CoreLogic’s data showed prices inched up by just 0.1%.
We’ve previously pointed out that the decline in distressed properties, has actually skewed national average home prices upward in the Case-Shiller data. “Measures which exclude distressed sales from the calculation of house prices are rising at a slower pace than those which include this in-demand segment of homes,” writes Diggle.
This slowdown in home price growth seems to be “here to stay,” writes Paul Diggle at Capital Economics.
“The primary reason that house price gains are set to slow further is the loosening in housing supply conditions,” writes Diggle.
The U.S. housing market has been dealing with tight supply, with a key issue being housing obsolescence — “properties that are no longer desirable because their characteristics do not match what buyers are looking for in a home,” Mark Fleming at CoreLogic wrote earlier this year.
This includes homes that are in locations which are no longer popular or in neighborhoods that lack the amenities people want.
“Admittedly, the decline in the months’ supply of unsold stock on the market in May is consistent with house price inflation flattening off at its current level,” according to Diggle. “But if supply conditions loosen further as we expect, house price inflation will continue to moderate.”