Pace of Home Price Growth Slows in September

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Lenny Ignelzi/AP

WASHINGTON -- The U.S. housing market cooled off in September, as home prices rose at an ever slowing pace.

Prices increased 5.6 percent in September compared to a year ago, real estate data provider CoreLogic said Tuesday. That's down from annual gains of 6.4 percent in August and 6.8 percent in July.

Home prices had been climbing by as much as 12 percent annually toward the end of last year. But the acceleration out of the housing crash that triggered the Great Recession has become unsustainable. Wages have barely budged after inflation and lending standards remain relatively strict. This makes it difficult for families to pay the higher home prices.

CoreLogic (CLGX) forecasts that the slowdown will continue, with annual home price growth slipping below 5 percent by September 2015. This should help bolster home sales for first-time buyers with adequate incomes and down payment savings, yet there are few signs that younger Americans are buying real estate.

The share of homes bought by first-timers fell to 33 percent this year from 38 percent in 2013, according to a report released Monday by the National Association of Realtors. That share of sales was the lowest since 1987 and significantly below the historic average of 40 percent.

Higher rents, meager incomes and student debt have minimized how much money millennials can save. A typical first-time buyer earned $68,300 and purchased a 1,570 square-foot home worth $169,000.

Part of the problem is that fewer households are forming since the recession struck in late 2007. Nearly a third of adults are living with roommates or family, compared to 27.4 percent in 2006, according to the real estate firm Zillow (Z).

As a result, the United States contains 5.4 million fewer households than it otherwise would. The individuals living in a doubled-up household have median incomes of $29,000, less than half of what a median first-time homebuyer earns.

Every state registered a price gain in September, according to CoreLogic. Prices reached new peaks in Colorado, North Dakota, South Dakota and Texas, while prices are within 10 percent of their previous highs in 28 other states.

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Pace of Home Price Growth Slows in September
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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