The West continued to drive the growth of home prices even as year-over-year price growth continued to fall, according to the latest S&P CoreLogic Case-Shiller Index.
Nationally, the index reported a 4.7 percent annual gain in December, down from 5.1 percent on a month-over-month basis. The index, which also breaks down home price growth across 20 and 10 of the largest metros in the U.S. indicated that its 10-City Composite Index's annual increase was down to 3.8 percent in December from 4.2 percent in the previous month. The 20-City Composite Index also registered a slight fall in home price gains at 4.2 percent against 4.6 percent in the previous month.
Despite this reduced pace, according to David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, home prices continue to outpace wage gains and inflation. "A decline in interest rates in the fourth quarter was not enough to offset the impact of rising prices on home sales," Blitzer said. "The monthly number of existing single-family homes sold dropped throughout 2018, reaching an annual rate of 4.45 million in December."
According to Dr. Ralph B. McLaughlin, Deputy Chief Economist and Executive of Research and Insights for CoreLogic, "2018 was a turning point for home price growth in the U.S. Housing market." He said that home prices during the year grew at the slowest rate for a calendar year since 2014.
However, according to Blitzer, regional patterns of home price growth continued to shift during the year. Western markets continued to drive national price growth throughout the year.
While Seattle and Portland Oregon led home price gains from late 2016 to the spring of 2018, they were replaced by Las Vegas and Phoenix which recorded the fastest price increase in December. In fact, Seattle ranked 11th and Portland was 16th among the cities that recorded the fastest price gains by the end of 2018.
"Currently, the cities with the fastest price increases are Las Vegas and Phoenix," Blitzer said. "These are a reminder of how prices rose and collapsed in the financial crisis 12 years ago. Despite their recent gains, Las Vegas and Phoenix are the furthest below their 2006 peaks of any city followed in the S&P CoreLogic Case-Shiller Indices."
Looking at the market in 2019, McLaughlin said, "With inventory now rising from historic lows and price gains continuing to outpace wage growth, we should see home price appreciation settle toward more reasonable levels throughout 2019 and the remainder of this economic cycle."