U.S. home values rose at a measured pace in November, a sign that demand remains weak as many buyers have been priced out of the market.
Prices increased 5.5 percent in November compared with 12 months earlier, real estate provider CoreLogic said Tuesday. That was up slightly from October’s year-over-year increase of 5.4 percent, which was revised downward from a previously reported 6.1 percent.
The housing market faces an affordability crunch. Many potential buyers were sidelined by double-digit home price gains in 2013, which eclipsed average wage growth of roughly 2 percent. That affordability gap caused sales to slide in 2014, restraining price growth in recent months.
CoreLogic projects that price growth will remain mild as the U.S. real estate market continues to recover from the lows reached after the Great Recession. Nationwide, home prices remain 12.9 percent below their April 2006 peak.
Over the next 12 months, CoreLogic expects that home values will rise 4.6 percent. The firm estimates that roughly half the country’s homes will match or surpass their pre-recession prices by the middle of 2015.
But “pockets of weakness” are surfacing in some parts of the country, noted Sam Khater, deputy chief economist at CoreLogic.
In three of the states with the highest annualized gains in November – Texas (8.5 percent), Colorado (8.8 percent) and North Dakota (7.9 percent) – home values have “been benefiting from the energy boom,” Khater said. But as oil prices have more than halved from $107 a barrel in June, home values in these states may see downward pressure, he said.
Prices nudged up just 2.5 percent over the past 12 months in the Washington, DC, metro area. That slowed growth in surrounding states, with Maryland chalking up a nearly flat 0.1 percent gain and Virginia prices increasing only 1.8 percent.
Still, home values increased a solid 9 percent in Michigan and 7.6 percent in California.
And falling oil prices correspond with cheaper gasoline, which could free up income for Americans to spend on homes. Economists also expect that solid hiring over the past year should produce stronger wage growth in 2015, which would also help with affordability.
The National Association of Realtors estimates that 2015 sales will total 5.3 million. The trade group forecasts that 4.9 million existing homes were sold in 2014, down 3 percent from 5.1 million in 2013. Analysts say sales of roughly 5.5 million existing homes are common in a healthy real estate market.
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