U.S. house prices climbed 0.1% in November from October, the smallest monthly gain in almost two years, indicating the real estate recovery may be losing strength, the Federal Housing Finance Agency said.
The seasonally adjusted increase fell short of the 0.4% average estimate of 11 economists, data compiled by Bloomberg show. Prices rose 7.6% from a year earlier, the FHFA said Thursday in a report from Washington.
The increase in U.S. home prices, which has been fueled by tight inventory and improving employment, is poised to slow as real estate becomes less affordable. The housing recovery “is entering the middle innings after an incredible run in 2013,” Stan Humphries, chief economist at property-website operator Zillow Inc., said before the FHFA announcement.
“Affordability issues will help put the brakes on many markets that saw huge appreciation rates, like California and the Southwest, creating volatility that could potentially cause whiplash for homebuyers and sellers,” he said in a statement today. “At the same time, we expect more homes to be available this year as more sellers enter the market and more homes get built, and a decline in investor competition should make for a more hospitable market for many buyers.”
The increase from October was the smallest since January 2012, when prices fell 0.2%, according to the FHFA.
The report showed prices increased 0.5% from October in the Mountain area, which includes Arizona and Nevada; the West North Central area, including North Dakota and South Dakota; and the East North Central area, with Illinois and Michigan.
Prices fell most in the East South Central region, including Alabama and Tennessee, with a 1.4% drop. The New England and Mid Atlantic areas also had declines.
The Pacific region, including California and Oregon, had the biggest year-over-year increase, at 15.4%.
Rising prices combined with a jump in mortgage rates from near-record lows in May have caused some homebuyers to hold back. The average rate for a 30-year fixed mortgage was 4.39% this week, up from 3.35% in early May, according to Freddie Mac data.
Sales of previously owned homes rose 1% in December pace, the National Association of Realtors reported Thursday. It was the first increase in five months and less than the median forecast of economists in a Bloomberg survey.
The FHFA index measures transactions for single-family properties financed with mortgages owned or securitized by Fannie Mae and Freddie Mac. It doesn’t provide a specific price for homes. The gauge is 8.9% below its April 2007 peak.