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Home Price Increases are Slowing Down

Standard & Poor publishes a monthly composite of 20 major metropolitan areas (including the San Francisco area) based on the Case-Shiller Index of repeat home sales.The most recently released Composite 20 Index (SPCS20R) shows that although home prices were up 12.4% for the period of July 2012 - July 2013, July prices only show a 0.6% increase from June (after adjusting for seasonal pricing). Experts are saying that the pricing increase seems to have already peaked, and many cities are now experiencing slower gains each month.The Case-Shiller Index for the San Francisco metropolitan area for July 2013 is 176.87 - for comparison, this is about the same as the pricing index for homes in this area in February 2008 (174.54).Jed Kolko, the chief economist for real estate website Trulia.com says that these slimmer price increases are due to an increased number of homes for sale, combined with a decrease in investor purchases. However, Zillow's chief economist Stan Humphries says that the price gains will need to slow even further before they are at a sustainable level.Interest rates are also lower than expected, thanks to the Federal Reserve's decision to wait to reduce the number of monthly purchases of mortgage-backed securities and Treasury bonds - a contributing factor to maintaining lower long-term interest rates. These lower interests rates have a "limited, but favorable" impact on housing, according to David Blitzer of S&P Dow Jones Indices. Since the Fed's announcement of this decision, interest rates are the lowest they have been since mid-June.

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