Seattle-area home prices slipped in December for the third month in a row but ended 2013 with the strongest annual appreciation since 2005, according to the S&P/Case-Shiller 20-city index released Tuesday.
The average price of existing single-family homes in King, Snohomish and Pierce counties edged down 0.5 percent from the previous month, after a 0.1 percent dip in November. By comparison, the 20-city index dropped 0.1 percent in December, as it did the prior month.
It was the best December for year-over-year price gains for the local and national markets since 2005. Seattle-area prices increased 12.4 percent from December 2012, while the 20-city index soared 13.4 percent.
“However, gains are slowing from month-to-month, and the strongest part of the recovery in home values may be over,” David Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a statement. “Recent economic reports suggest a bleaker picture for housing.”
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Higher home prices and mortgage rates are hurting affordability, while building permits for new homes have been below expectations, Blitzer said.
The strong appreciation in 2013 and the slowing momentum in recent months have fueled fears of another housing bubble, but real prices aren’t close to where they were before the crash, Yale economist Robert Shiller, who codeveloped the home-rice index, told reporters Tuesday.
While home prices nationally should rise this year, Shiller said he expects the growth pace will slow considerably and could even reverse by year’s end.
He pointed to a weak economy and surveys that suggest homebuyers’ expectation for appreciation over the next decade is about 3 percent annually.
“We’re just losing our general sense of optimism about housing, and it’s sort of slowly percolating through the population,” Shiller said.
Miami, with a 0.9 percent month-over-month rise, led just six cities that saw price gains in December, while Cleveland posted the largest price decline, at 1.2 percent.
Over the year, home prices rose in all 20 cities, but 11 cities saw a slowdown in appreciation. Prices in Las Vegas, Los Angeles and San Francisco all soared more than 20 percent.
The S&P/Case-Shiller index tracks the average price level of existing single-family homes by comparing the prices of homes sold in the past three months with the prices they previously sold for.
The index excludes homes flipped more than once in six months, but it includes bank sales of foreclosed properties to third parties — a choice that Seattle-based Zillow says has painted a misleading picture of home prices.
“December capped an undeniably great year in housing in 2013, though it definitely was not as strong as today’s Case-Shiller data indicates,” Stan Humphries, chief economist at Seattle-based Zillow, the online real-estate marketplace, said in a statement. “Less distorted indices show national appreciation ending the year at roughly half the rate today’s data shows, which is still nothing to sneeze at.”
With the spring home-shopping season on the way, Humphries said, buyers can expect less competition from investors and slightly more homes for sale than last year.
”Looking further ahead, the market should continue its slow march back to normal, as annual appreciation rates fall to more sustainable levels around 3 percent, mortgage-interest rates climb to levels closer to historic norms and negative equity continues to recede,” he said.
Sanjay Bhatt: 206-464-3103 or firstname.lastname@example.org On Twitter @sbhatt