Gains in Home Prices Slow for Fourth Straight Month

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Nick Ut/AP

WASHINGTON -- U.S. home prices grew more slowly in August amid modest sales, a trend that could help make homes more affordable in the months ahead.

The Standard & Poor's/Case-Shiller 20-city home price index, released Tuesday, rose 5.6 percent in August from 12 months earlier. That's down from 6.7 percent in July and the smallest gain since November 2012. Home prices were rising at a double-digit pace as recently as March.

The rapid slowdown has been most pronounced in many of the western cities that have seen the biggest price gains in recent years. The annual price gain in Las Vegas braked sharply to just 10.1 percent from 12.8 percent in July. Prices rose 9 percent in San Francisco from a year earlier, down from 10.5 percent.

The smaller price gains, combined with a recent drop in mortgage rates, could spur more sales. Home sales rose in September to their fastest pace this year, but still remain slightly below the pace reached 12 months earlier. The number of homes for sale is rising, which helps keep prices in check.

"We're transitioning away from a period of hot and bothered market activity, characterized by low inventory and rapid price growth, onto a more slow and steady trajectory, which is great news," Zillow chief economist Stan Humphries said. "As appreciation cools and more inventory comes on line, buyers will start to gain a more competitive advantage."

The Case-Shiller 20-city index covers roughly half of U.S. homes. The index measures prices compared with those in January 2000 and creates a three-month moving average. The August figures are the latest available.

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Gains in Home Prices Slow for Fourth Straight Month
In 2013, the median lot size of a new sold single-family house was 8,596 square feet, or just under 0.2 acres. While that might not seem like a lot for you suburban homeowners, a regional breakdown shows that the small average size isn't due to urban inhabitants alone. The Northeast enjoys the largest average lot, at 13,052 square feet, while the less densely populated South and West lay claim to just 8,649 square feet and 6,796 square feet, respectively.
From a footprint of 1,650 square feet in 1978, the average American home has grown 50 percent, to 2,478 square feet. Yet tough times seem to be squeezing our expansionary attitude. Although new single-family homes sold in 2013 clocked in at a median 2,478 square feet, single-family homes completed in 2013 amounted to just 2,384 square feet. Homebuilder confidence has plummeted into pessimism in the last few months, hinting that the housing market's road to recovery might be rougher than expected.

While birth rates have held relatively steady for the past 40 years, everyone apparently needs more elbow room. The share of homes with four or more bedrooms has jumped from 27 percent in 1978 to 51 percent in 2013. And where would a bedroom be without a bathroom? While just 8 percent of 1978 homes had three or more baths, 37 percent of homes now fall in that category.

From 2008 to 2013, both the share of homes with four or more bedrooms and the share of homes with three or more bathrooms have jumped 10 percentage points, while median square footage is up 10.9 percent for the same period.

If there's one strong sign of new housing demand, it's home prices. After nose-diving during the Great Recession to a median sales price of just $216,700, home prices have been roaring back up. In 2013, the median sales price for a new single-family home was $268,900. But for those on the housing hunt, don't be discouraged. Home prices today still don't hold a candle to costs in 2006, according to the well-regarded Case-Shiller Home Price Index. In 2006, the index topped 200 before plummeting to less than 140, and current rates put the index just above 170.
It is America, after all. Our industrialized nation was built on the back of Henry Ford, and America is in no danger of breaking its automobile addiction. In 2013, a whopping 300,000 of the 429,000 new single-family homes sold included a two-car garage. And 98,000 new homes included a three-car garage -- the highest amount since 2007. Of all new homes built, only 10,000 failed to include a garage or carport.
American homebuyers are building bigger homes than ever before. But if there's one thing the recent recession has shown us, bigger isn't always better. Although 30 percent of Americans believe real estate is the best long-term investment, homeownership isn't for everyone. There are plenty of reasons to spend less or invest elsewhere -- and leave keeping up with the Joneses to Mr. and Mrs. Smith.
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