Charlotte-area home prices rose 4.9 percent in March, but the pace of annual gains in the region and elsewhere continues to slow, a report Tuesday showed.
The slowdown, reported Tuesday by Standard & Poor's Case-Shiller home price index, follows a broader trend of appreciation cooling off nationwide. A composite index of U.S. 20 cities and a separate index of 10 cities show slowing annual price increases for the past four months, the Case-Shiller report said.
Charlotte has recorded a year-over-year slowdown in appreciation every month since November. Home prices nationwide are widely expected to continue rising at a slower pace, as appreciation returns to more normal rates.
“In a normal housing market, prices aren’t going to go up 12 percent a year every year,” David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said in an interview. “Given how far prices fell in the recession, a rebound is likely. But the rebound won’t go on forever, and prices should wind down.”
The Charlotte region has posted year-over-year price increases since March 2012, making March its 25th consecutive month of annual gains. As of March, average home prices across the U.S., including in Charlotte, are back to mid-2004 levels, the widely watched report showed.
Charlotte prices remain 9 percent below their peak in August 2007. Prices nationwide are still about 20 percent below their June-July 2006 peak.
Across all 20 U.S. cities tracked by Case-Shiller, prices increased 12.4 percent in March from a year ago, but prices climbed at a slower pace in 13 cities.
In Charlotte, a pullback in single-family home purchases by large investors has been one factor in slowing price gains, Blitzer said.
“That took some demand out of the market,” he said.
Large investors made up 13.1 percent of residential property purchases in Charlotte in the first quarter of this year, compared with 14.4 percent in the same period a year ago, according to a report released earlier this month by data firm RealtyTrac.
Those institutional investors, who have bought homes to turn them into rentals, have also cut back on purchases nationwide over the same period. Blitzer said rising home prices have lowered demand from investors for the homes.
A rebound in U.S. home prices began in the second quarter of 2012, he said, and annual price gains rose to double-digit levels in March of last year. Blitzer said he expects the rate of appreciation nationwide to be below 10 percent by the end of 2014.
Banks have tightened lending requirements since the housing crisis, making it difficult for some people to obtain a mortgage, Blitzer said. That coupled with some first-time homebuyers unwilling or unable to take on more debt is hurting home purchases, which is also contributing to the slowdown in home prices, he said.
Low supplies of homes for sale have been cited as one factor in pushing up home prices in Charlotte and elsewhere.
The number of existing homes for sale in the Charlotte metropolitan area fell to a 5.4-month supply in April, the Charlotte Regional Realtor Association reported last week. A year ago, the supply was at 5.7 months. A seller’s market is one in which the number of homes for sale is below a six-month supply, according to a widely accepted definition.
The recent, sizable gains in U.S. home prices have raised concerns about affordability. This month, the chief economist of the National Association of Realtors said tight inventories of homes for sale are creating “unsustainable and unhealthy” price growth in some large U.S. markets.
Rising home prices have been beneficial to homeowners who bought at the peak and still owe more than their homes are worth. Higher prices have put some homeowners back into positive equity, making them less vulnerable to foreclosure.
Real estate data firm CoreLogic reported Tuesday that the foreclosure rate in the Charlotte metro area fell to 1.23 percent of all outstanding mortgages in March, down from 2.57 percent in March 2013. It’s the lowest the rate has been since 1.21 percent in April 2009.
Case-Shiller tracks only repeat sales.
