The Standard & Poor's/Case-Shiller 20-city home price index, released Tuesday, declined 0.1 percent from December to January, the same drop as the previous two months. That figure is not adjusted for seasonal variations, so the dip partly reflects weaker winter sales.
The index rose a healthy 13.2 percent in January compared with 12 months earlier. But that is down from a 13.4 percent increase in 2013 and is the second straight decrease.
Most economists aren't concerned about the moderation in price gains. Home prices jumped over the past two years as very low mortgage rates pushed up sales. Meanwhile, the supply of available homes remained tight. Many homeowners couldn't sell because they owed more on their mortgages than their houses were worth.
Meanwhile, investors swooped in and bid up prices in places like Las Vegas, Phoenix and other cities in the south and west.
"The home price appreciation we've been seeing is unsustainable," said Stan Humphries, chief economist for real estate data provider Zillow. "It needs to moderate over time or we risk inflating another housing bubble."
The Case-Shiller 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 January figures are the latest available.
Twelve cities reported price declines in January from the previous month. The biggest decline was in Chicago, where home prices dropped 1.2 percent, followed by Seattle, where prices fell 0.8 percent.
Las Vegas reported the biggest price gain, up 1.1 percent, followed by Miami, with 0.7 percent.
Compared with a year earlier, New York and Washington, D.C., posted their largest gains since 2006, just before the housing bubble burst.
The slowdown in price gains follows other signs that the housing recovery has hit a rough spot. Sales of existing homes in February fell to their lowest level since July 2012. And home construction slipped for the third month in a row, though builders sought the most permits in February than in any month in four years.
Mortgage rates are roughly a full percentage point higher than they were last spring, although they remain low by historical standards. The average rate on the 30-year loan is 4.32 percent, mortgage buyer Freddie Mac said last week, down from 4.37 percent the previous week.
Most economists expect home sales and prices to rise in 2014, particularly as the weather improves, but at a slower pace.
Humphries expects home prices will appreciate 3.4 percent this year, roughly in line with historical averages. Zillow's home price index rose 5.6 percent in February from a year earlier.
Some economists say the Case-Shiller figures overstate recent price gains because they include foreclosures. Foreclosed homes usually sell at steep discounts. As the proportion of those sales declines, the index rises more sharply.
SALES OF NEW HOMES FALL
Fewer people bought new U.S. homes in February. Sales fell to their slowest pace in five months.
Sales of new homes declined 3.3 percent last month to a seasonally adjusted annual rate of 440,000, the Commerce Department said Tuesday. That was down from a revised rate of 455,000 in January.
Buying dropped off during February in the Northeast, which was battered by snowstorms. It also fell in Western states, where last year's price increases have made homes less affordable.
New-home sales have declined 1.1 percent over the past 12 months. Despite the seasonal hit by a cold winter, sales are still on track to exceed the 428,000 total from 2013, when they rose 16.3 percent to their highest level in five years
Most economists expect sales to rebound as the weather improves and the spring buying season begins. Not only does warmer weather bring more traffic to open houses, but families are usually reluctant to move in the middle of the school year.
Still, several other indicators from February suggest that a sector-wide rebound has yet to begin.
An index tracking mortgage applications fell last month to its lowest level since December 2000. The Mortgage Bankers Association reported its seasonally adjusted index of refinancing and home-buying demand dropped 8.5 percent to 348.5 in the week ended Feb. 21.
The National Association of Realtors said last Thursday that sales declined 0.4 percent last month to a seasonally adjusted annual rate of 4.6 million. That was the sixth decline in the past seven months.
The National Association of Home Builders/Wells Fargo builder sentiment index was 46 in February. Readings below 50 indicate that more builders view sales conditions as poor rather than good.
And builders started work on 907,000 homes at a seasonally adjusted annual rate in February, the Commerce Department said last week. That was down 0.2 percent from January, when construction had fallen 11.2 percent.
Freezing temperatures and snowstorms have caused a slip in housing activity this past winter while higher mortgage rates and higher prices had acted to slow growth earlier in 2013.
The Standard & Poor's/Case-Shiller 20-city home price index reported Tuesday that prices rose a healthy 13.2 percent in January compared with 12 months earlier. That's down slightly from a 13.4 percent increase in 2013.
Borrowing costs have also increased over the past year.
The average rate on a 30-year mortgage was 4.32 percent last week. Rates surged about 1.25 percentage points from May through September, peaking at 4.6 percent. Those increases began after the Federal Reserve signaled that it would begin to pull back from its bond-buying program.
Those Fed bond purchases were designed to keep long-term interest rates low to spur more borrowing and boost economic growth. Since December, the Fed has reduced the size of its monthly purchases to $55 billion from $85 billion.
CONSUMER CONFIDENCE REBOUNDS
U.S. consumer confidence has rebounded to the highest reading in six years, providing a further sign that the economy's prospects should brighten with warmer weather.
The Conference Board said Tuesday that its confidence index rose to 82.3 this month from a February reading of 78.3. It was the strongest reading since the index stood at 87.3 in January 2008, just as the Great Recession was beginning.
Conference Board economist Lynn Franco said consumers are moderately more upbeat about future job prospects and the overall economy, though less optimistic about income growth.
"Overall, consumers expect the economy to continue improving and believe it may even pick up a little steam in the months ahead," Franco said.
Consumer confidence is closely watched because consumer spending accounts for about 70 percent of economic activity.
The strength in the index this month came from an increase in consumers' expectations, which offset a slight decline in their view of current conditions.
The number of people who felt jobs were hard to get rose slightly to 33 percent, up from 32.4 percent in February. Economists expect views about the labor market to brighten as employers increase the pace of hiring.
Employers added 175,000 jobs in February, far more than in the previous two months, and many private economists foresee solid job gains ahead.
Many see the economy finally gaining momentum this year. The latest outlook from top forecasters at the National Association for Business Economics expect the overall economy, as measured by the gross domestic product, will expand 3.1 percent this year. That would be a substantial increase from last year's lackluster 1.9 percent growth. If that target is reached, it would be the best performance in nine years.
An 18-month recession ended in the summer of 2009, and the recovery since then has been achingly slow. But the tax increases and spending cuts that dragged on growth last year will be less of a factor in 2014, according to many economists.
Faster economic growth and more robust hiring would lift consumers' spirits and power stronger consumer spending, analysts say. That expectation for stronger growth, though, doesn't include the first three months of 2014, when severe winter storms raked parts of the country.
The NABE forecasters expect January-March economic activity to expand at an annual rate of 1.9 percent but then recover to a 2.8 percent growth rate in the April-June quarter.
At its December, January and March meetings, the Federal Reserve trimmed its monthly bond purchases and indicated that the economy, as it gains momentum, will need less support through such bond purchases. Those actions have pushed down long-term interest rates, encouraging investors to remain active in the markets.
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