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Economy Watch: Home Prices Still Rising, But Not as Fast

By Dees Stribling, Contributing Editor

S&P Dow Jones Indices reported on Tuesday that the Case-Shiller Home Price Indices, which it publishes, showed that home prices are still going up on an annual basis, though not as much as they have been. The annual increases for the 10-city and 20-city composite indexes (ending in February) were 13.1 percent and 12.9 percent, respectively.

Month-over-month, however, the indexes didn’t move much in February. Thirteen of the 20 cities declined in February. Cleveland experienced the largest decline, dropping 1.6 percent. Chicago and Minneapolis lost 0.9 percent, while Las Vegas experienced a loss of 0.1 percent, marking its first decline in almost two years (but then, it had fallen a lot during the recession).

“The annual rates cooled the most we’ve seen in some time,” notes David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. For example, “New York, Washington and Boston are seeing some of the slowest year-over-year gains. However, even there prices are above their levels of early 2013. On a month-to-month basis, there is clear weakness.”

Apartment markets show renewed vim

The National Multifamily Housing Council said on Tuesday that its Quarterly Survey of Apartment Market Conditions for the first quarter of 2014 indicated renewed strength in U.S. apartment markets. All of indexes that the organization compiles were above 50 for the first time since Q1 2013, indicating growth: market tightness came in at 56, sales volume at 52, equity financing at 53 and debt financing at 63.

The Market Tightness Index, in particular, bounded back, rising from 41 to 56. Almost half—47 percent—of the respondents reported unchanged conditions, while 32 percent saw conditions as tighter than in the January survey, which covered the fourth quarter of 2013. About a third of respondents saw conditions as looser than three months ago.

“Supply appears to have ramped up enough to meet approximate ongoing demand with few, if any, signs of irrational exuberance,” NMHC s chief economist Mark Obrinsky explains. “A handful of submarkets are facing a temporary surge in new deliveries that may put downward pressure on occupancy rates or rent growth. However, increased development costs could well keep a lid on new supply.”

Wall Street had another up day on Tuesday, with the Dow Jones Industrial Average up 86.63 points, or 0.53 percent. The S&P 500 advanced 0.48 percent and the Nasdaq gained 0.72 percent.