Charlotte-area yearly home price gains slowed in May for the first time in 11 months – a sign that the local housing market might be cooling off.
The closely watched Standard & Poor’s Case-Shiller indexes, released Tuesday, showed prices of existing Charlotte homes increased 7.1 percent from a year ago, down from April’s year-over-year increase of 7.3 percent.
On a national level, average home prices have returned to spring 2004 levels, according to Case-Shiller. Across 20 U.S. cities, May home prices rose 12.2 percent, their largest yearly increase since March 2006, but remain about 25 percent below June-July 2006 peaks.
While the data show the local and national housing sector is healthier than during the depths of the downturn, David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said U.S. home price growth isn’t expected to stay at current levels.
“I don’t think we’re going to sustain double-digit annual rates of increase over the long haul,” he said in a phone interview. “Over the next year to year and a half, the rate of increase is going to slow down for almost all the cities.”
In Charlotte, home prices have been rising as inventory shrinks and brokers report some listings resulting in competing bids. A year ago, Charlotte brokers say, competing bids would have been virtually unheard of.
Existing Charlotte-area homes are also selling faster than they were a year ago, according to the Charlotte Regional Realtor Association. In June, it took 93 days on average for a home to sell, a decline of 16 percent from June 2012.
Despite signs of a strengthening market, some Charlotte sellers have had to lower prices this summer after failing to attract buyers.
Such reductions are helping to keep price increases in check.
Mark DuPont, 68, listed his home in the Downs Grant neighborhood for $247,500 July 6, but has since slashed that to $237,500.
“It was way overpriced for the area,” DuPont said Tuesday. “I really thought I would get more interest than I did.”
After lowering the price and putting the home on the local multiple listing service, he’s getting more inquiries, he said. Since last week, there have been five showings but no offers, he said.
“I think it will sell,” he said.
Holly Corbit also had to lower the price of the Cameron Wood home she owns with her husband. The couple listed it June 2 at $230,000 after putting in new appliances and making other upgrades to the home, which was built in 1988.
“We thought we were competitively priced within our neighborhood,” she said.
They received no offers and, worried that there would be less interest in buying homes after the summer ends, put it on the multiple listing service and dropped the price to $215,000.
“We were concerned about bringing it down significantly,” she said. “But we said, ‘Well, we’ve got to get offers.’ ”
About four days later, a flurry came in, she said. The house is now under contract.
As to why the home didn’t sell at $230,000, she speculated that buyers are still trying to find a bargain.
“They’re just trying to chisel down as low as they can go,” she said.
Rising mortgage rates
Rising mortgage rates are also creating uncertainty about the housing market. According to Freddie Mac, the government-controlled mortgage-finance company, the average rate for a 30-year, fixed-rate mortgage in July is 4.37, up from 3.55 the same month last year.
On Monday, the National Association of Realtors’ chief economist said its index of pending sales dropped 0.4 percent in June from May. Lawrence Yun, the association’s economist, blamed higher mortgage rates and lower inventory of homes for sale.
In Charlotte, monthly price gains tapped on the brakes in May, according to Case-Shiller, which does not track sales of newly built homes in its indexes.
Prices rose only 0.1 percent from the month before, after a 1 percent increase from March to April.
The same trend took place in the U.S. Across the 20 cities, May prices rose 2.4 percent from April, down from a 2.6 percent rise from March to April.
Blitzer, of Case-Shiller, said the decline was not significant.
As mortgage rates go up, he said, “that will dampen housing.”
But the housing industry won’t “fall off a cliff” as a result, he said.
“It’s likely to be much more gradual. If past patterns are any indication, a lot of people will shift from fixed-rate loans to adjustable-rate loans. I don’t see any reason why we wouldn’t see it again.”