The S&P/Case-Shiller index of property values in 20 cities increased 9.3 percent from May 2013, the smallest year-to-year advance since February 2013, after rising 10.8 percent in the year ended in April, the group said Tuesday in New York. Compared with the prior month, prices dropped for the first time in two years.
"It's a healthy slowdown for the housing market," said Aneta Markowska, chief U.S. economist at Société Générale in New York. "The sooner we correct to a more sustainable growth rate, the better it is for the price outlook in the medium term."
The Case-Shiller index is based on a three-month average, which means the May figure was influenced by transactions in April and March.
Home prices, adjusted for seasonal variations, decreased 0.3 percent in May from the previous month, the first drop since January 2012, after climbing 0.1 percent in April. Unadjusted prices increased 1.1 percent in May for a second month.
Higher mortgage rates and strict lending requirements are bridling sales. Continued job growth and greater balance between supply and demand will be needed to bring some potential homebuyers back into the market.
"Housing has been turning in mixed economic numbers in the last few months," said David Blitzer, chairman of the S&P index committee. "At the same time, the broader economy and especially employment are showing larger improvements and substantial gains."
Residential real estate has struggled to gain traction since mid-2013, as mortgage rates climbed from historically low levels.
Other declines
The number of Americans who signed contracts to buy previously owned homes unexpectedly declined in June, falling 1.1 percent from the month before, figures from the National Association of Realtors showed.
Another report showed that sales of newly built homes declined last month, decreasing 8.1 percent to a 406,000 annualized pace and following a May reading that was a record 12.3 percent lower than previously estimated, according to Commerce Department data.
