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Prices Rising to a Possible Peak? A Closer Look at the Numbers

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home_prices_rising_object_coinsIn July, U.S home prices continued to increase, according to the latest S&P/Case-Shiller Home Price Index. On a year-over-year basis, home prices grew by 12.4 percent in July, the fastest annual pace since February 2006, at the height of the housing bubble. While this is good news for housing, a closer look reveals that while prices are still accelerating, the rate is decelerating; the July increase was a modest 1.8 percent, the smallest monthly gain since March.

A decelerated growth was seen in 15 out of the 20 cities tracked. The 20-city composite grew a shy 0.6 percent from a month earlier, a notable difference from the 0.9 percent gained in June and the 1 percent gained in May.

“Since April 2013, all 20 cities are up month to month; however, the monthly rates of price gains have declined,” said S&P Dow Jones Index Committee Chairman David Blitzer, in a recent release. Blitzer continued by stating that “the rate of increase may have peaked.”

Not all industry professionals agree with the idea of a price peak. “Real estate values have been playing catch up for a while now and the increases in values as measured by Case-Shiller have been unsustainably high,” says Dr. John Tuccillo, Florida REALTORS’ Chief Economist and former NAR economist. “Increases of this magnitude really can’t continue, but that doesn’t mean that they will reverse. Rather, we see positive value changes but at a lower rate. For example, in Florida we appear to be settling into a 4.5-5 percent real increase in values. This is sustainable for the foreseeable future.”

Americans still seem to be in good spirits in regards to home prices. According to a recently released Bankrate report, among households earning between $50,000 and $75,000 per year, some 65 percent surveyed expect prices to rise, 27 percent say they will stay the same and just 6 percent expect prices to fall.

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