Robert Shiller, co-founder of the S&P/Case-Shiller Housing Market Index, said that while the U.S. housing market will continue to grow, it has slowed down and can be expected to expand moderately in coming months. Mr. Shiller, a professor of economics at Yale University and Nobel prize winner, said that slower momentum in housing markets is expected to continue.
Home Prices: What's Causing the Cooling Trend
Pending home sales have fallen by approximately 11 percent year-over-year as of February.
Housing starts for single family homes were two percent lower than expected with expectations of 946,000 starts on an annualized basis as of March. Analysts expected housing starts to reach an annual rate of 990,000, but the March reading was higher than February's annual rate of 920,000 housing starts.
Mortgage rates rose about one percent over the past year, but remain below historical levels.
Home prices rose by 13.20 percent year-over-year in January according to the S&P/Case-Shiller Home Price Index report released in March, although they dropped on average by 0.10 percent over the three most recent months reported.
Mr. Shiller said that real estate investors are "pulling back" and that the Fed's ongoing reductions in the volume of its quantitative easing program (QE) are factors contributing to slower growth in housing markets. The Federal Reserve's QE program was designed to help hold long-term interest rates down. Mortgage rates could go higher as the Fed continues to reduce its QE asset purchases.
Stable Home Prices, Easing Mortgage Requirements Assist Buyers
Rapidly rising home prices, higher mortgage rates and strict lending requirements have kept moderate-income and first-time homebuyers on the sidelines, but as home prices stabilize, more buyers may be able to get mortgages and find affordable homes. With less competition expected from investors and cash buyers, there will likely be fewer bidding wars driving up home prices and derailing mortgage-dependent buyers.
Some markets have experienced low inventories of available homes for sale, which creates further constraints for would-be homebuyers. Homeowners may ease the shortage by listing their homes sooner than later if they think that housing markets are set to stall.
Some mortgage lenders are easing lending requirements to adjust for lower business volume. The availability of affordable and accessible mortgage loans is seen as a key factor for first-time and moderate-income buyers to achieve home ownership.
Analysts note that after the rapid run-up in home prices in 2013, that U.S. housing markets may be entering a period of "fits and starts" consistent with the overall economic recovery.