As expected, housing price gains slowed this month as reflected by the S&P/Case-Shiller index.
The 20-city composite, an index of major metropolitan areas from Atlanta to Washington, D.C., rose 12.9% year-over-year for the month ending in February. That healthy double-digit gain would cause optimism anywhere but in the world of housing prices, where it reflects a deceleration from the 13.2% increase clocked for January.
What's more, the slowdown is expected to continue for the next few months. The question the data poses is whether this easing of speed is worrisome or not.
David M. Blizter, the chairman of the committee that releases the indices, sounded downbeat in a release, noting that "the annual rates have cooled the most we've seen in some time." Blitzer cited weakness in housing starts and the fact that housing prices have not made it back to 2005 levels as two indicators of the lukewarm temperature of the market.
As someone who was wearing snow boots only a month ago, I'd say that there's a factor being overlooked -- the Winter That Would Not Quit. Housing data will probably continue to look weak (or weaker, since a 12.9% jump is nothing to sneeze at) for the next couple of months as it reflects a market where consumers had to trudge through muck to make their home purchases.
The delayed spring in much of the country could explain the softness in housing starts too, so -- in an attempt to take some of the drama out of the data -- let's take a look at three other factors:
- Mortgage rates. Despite the threat of Fed tapering, rates have been fairly consistent for a few months at around 4.5%. While there's no discount for consumers taking smaller mortgages to buy starter homes, last week's rates of 4.49% for small loans and 4.41% for jumbo loans aren't likely to scare any consumers away. (Though an increase in the upfront payments, known as points, to get those loans bears watching. Points paid for a jumbo went up from .18 to .34 according to the Mortgage Bankers Association, which surveys rates nationally).
- Weakness from peak. Taken in aggregate, housing prices have been around 20% below their highs of Spring/Summer 2006. ("Spring/Summer" is used because some localities peaked at different times than others). However, as TIME's Rana Foroohar has noted, there's a difference between top markets and the rest of the country, with higher priced-markets performing better. Still, every single city in the Case-Shiller 20 showed a year-over-year increase in prices, ranging from Cleveland (up 3.0%) to Phoenix (up 12.5%) and Seattle's (12.8%) to highest-flyer Las Vegas (up 23.1%).
- Dearth of inventory. This may be the real X factor behind how the 2014 turns out. Monday's release from the National Association of Realtors noted that the Pending Home Sales Index, an indicator based on contract signings, rose 3.4% from February to March, but noted "ongoing inventory shortages in much of the U.S." A lack of homes can lead to the existing homes being fought over -- and their prices bid up -- by potential buyers, but it isn't a component of a broad-based real estate recovery.
The most interesting city to watch may be one in middle America. Chicago, up 10.8% year over year, was down 0.9% from January to February, according to Case-Shiller, but it looks like the city's March numbers, as reported by local realtors, are up. The Illinois Association of Realtors noted that the median price for homes (which includes both single-family houses and condos) in the city of Chicago was $237,000, versus $187,000 a year previous. Mary Ellen Podmolik, writing in the Chicago Tribune, notes "buyers are vexed by a shortage of inventory that means there is little time to sleep on the decision to make an offer on sought-after properties." Keep your eye on Chicago for the next few months, and see if more inventory -- and more sales -- are generated, and how prices move. That may be a bellwether for real estate throughout the nation.