House prices in the Twin Cities metro area have consistently outpaced the national average, but price gains this summer are slowing dramatically.
During June, prices in the Twin Cities increased 3.9% over last year compared with a 3% gain nationwide, according to the S&P CoreLogic Case-Shiller Home Price Index, which tracks repeat sales of the same homes.
After hovering between 5.5% and 6.3% during all of 2018, the index price gains in the metro started slowing significantly early this winter. Since April, annual price gains have increased at only about half the pace of the same time last year.
While the Twin Cities index reached a new high during June, those more-moderate gains have eased fears that the metro is on the verge of another price collapse, and they provide some relief for those who fear they are being priced out of the market.
“You want to see some price increases — that’s always good, but you don’t want to see increases that outpace wages or inflation,” said Herb Tousley, director of real estate programs at the University of St. Thomas. “This tells me that we’re not in a bubble.”
Nationwide, the biggest gains were in cities that saw prices plummet the most postrecession. That includes Phoenix, Las Vegas and Tampa, which posted the highest year-over-year gains among the 20 largest cities. In June, Phoenix led the way with a 5.8% year-over-year increase, followed by Las Vegas (5.5%) and Tampa (4.7%).
“Home price gains continue to trend down, but may be leveling off to a sustainable level,” Philip Murphy, managing director and global head of index governance at S&P Dow Jones Indices, said in a statement.
Earlier this month the trade group Minneapolis Area Realtors said the median price of all sales that closed during July was $283,700, 5.9% higher than last year. By another measure, which eliminates some of the statistical noise that comes with tracking the price of all closings during a particular period, the average price per square foot of all sales that closed during the month increased 3.1%.
Economists expect more-moderate home-price appreciation should hold steady as we enter the second half of 2019.
Zillow’s Matthew Speakman said in a news release that while prices are still climbing, the rate of annual appreciation appears to have leveled off near its long-term average, after consistently falling from a high point reached in the spring of last year.
He said housing demand remains strong as buyers are encouraged by rising wages and mortgage rates that keep falling amid growing economic uncertainty.
“Would-be buyers stand with preapproved mortgages in hand,” he said. “However, they’ve become unwilling to pay escalating prices for the relatively low inventory of homes that are on the market and instead are making sellers wait and even drop list prices.”