Home prices in 20 US cities rose at slower pace in May

A residential housing development stands in northwest Atlanta, Georgia, US.
A residential housing development stands in northwest Atlanta, Georgia, US.PHOTO: BLOOMBERG

NEW YORK (BLOOMBERG) - Home prices in 20 United States cities rose at a slower pace in the year ended May, keeping more properties within reach for prospective buyers.

The S&P/Case-Shiller index of property values increased 4.9 per cent from May 2014 after rising 5 per cent in the year ended in April, the group said Tuesday. The median projection of 28 economists surveyed by Bloomberg called for a 5.6 per cent year-over-year advance. Nationally, prices climbed 4.4 per cent.

The slower pace of appreciation may give younger or first- time buyers an easier point of entry into the market, especially as wages have seen little growth for much of the economic expansion. It also gives Federal Reserve officials room to be patient as they consider raising interest rates, which hasn't occurred since 2006.

"Nationally, single-family home-price increases have settled into a steady 4 per cent-5 per cent annual pace following the double-digit bubbly pattern of 2013," David Blitzer, chairman of the S&P index committee, said in a statement. "Over the next two years or so, the rate of home price increases is more likely to slow than to accelerate."

Economists' estimates in the Bloomberg survey ranged from gains of 5 per cent to 5.8 per cent. The S&P/Case-Shiller index is based on a three-month average, which means the May figure was also influenced by transactions in April and March.

All 20 cities in the index showed a year-over-year increase, led by gains of 10 per cent in Denver and 9.7 per cent in San Francisco. Washington showed the smallest increase at 1.3 per cent.

The year-over-year gauge provides better indications of trends in prices, according to the S&P/Case-Shiller group. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Home prices in the 20-city index adjusted for seasonal variations decreased 0.2 per cent in May, the biggest drop since July 2014, after being little changed the month before. The Bloomberg survey median called for a 0.3 per cent gain.

Property prices fell in 10 of 20 U.S. areas in May from a month earlier, led by a 0.9 per cent drop in Chicago. Adjusted prices rose in eight cities, led by Las Vegas, and were little changed in two others.

Housing has been making gradual progress this year, with steady job gains fueling the appetite for and wherewithal to buy homes. The economy has added 1.3 million jobs this year, while at 5.3 percent the unemployment rate is the lowest since April 2008.