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Home Prices Rose Quickly in 2013 But That Pace Is Slowing

By E Singer
Mar 3rd, 2014

home prices paceAccording to the Standard & Poor’s/Case-Shiller price index, home prices in 2013 rose at their fastest levels since 2013 at 11.3%, but those levels are tapering off as enthusiasm to buy a home wanes.

Higher home prices and rising mortgage rates are the main culprits behind the slowdown in home sales said Robert J. Schiller, a Yale economist and co-creator of the Case-Shiller price index. There is even concern that prices could drop on an annual basis by the end of 2014 as institutional investors retreat from home purchase sales. “It’s not a time of great enthusiasm for a home purchase,” Shiller said.


The climate of today’s housing market is far different from where things were just a year ago. Back then large investors were scooping up new homes to both take advantage of home prices and low interest rates. As both interest rates and home prices have risen, those types of sales have slowed.

Buyers Priced Out

For many of those who were looking to buy a home this year rising home prices can often mean being priced out of the market. This is especially true for many first time buyers who don’t have a lot of money to invest in a down payment. Home prices have often been rising at rates faster than many people’s incomes which is a barrier for people looking to purchase a home.

Not all cities have experienced the same spike in prices over the last several years. In fact, many cities have stood witness to falling prices, which can be booth good for investors and those looking to enter into the housing market. There are still a handful of cities where prices are rising despite a slowdown in other areas. Las Vegas, San Francisco and Los Angeles are just three areas with rising home prices. For Los Angeles in particular, prices rose by 20.3% from December 2012 to December 2013.

With prices beginning to taper off, this will once again help to spur enthusiasm for people to purchase a house. This of course comes in addition to what appears to be a temporary decrease in interest rates for home loans.

Staying Ahead of the Curve

Home prices in the United States bottomed out in the early part of 2012 and barring some unforeseen set of events aren’t likely to return to those levels. Some have suggested that the temporary slowdown of home sales is evidence of a weakening housing recovery. But not everyone shares this view.

Home Depot, which remains one of the largest providers of home improvement products in the country, remains optimistic. They are expecting home prices to rise at about half of what was seen in the market between 2012 and 2013. “While some of the housing data has softened, we continue to believe we’re in a moderate stage of recovery,” Carol Tomé, Home Depot’s chief financial officer, said during an investor call Tuesday.

Thus far it wouldn’t be the smartest idea to base your decision to purchase a house on the hope that home prices will continue to fall. That may happen but it doesn’t seem likely at this point. What is more plausible is that home prices and sales will rise just at a more moderate pace than what has been seen in years past.