Single-family home prices in the nation's 20 largest metro areas rose year over year in November by the most in more than six years, an industry group reported Tuesday, adding further credence to the notion that the housing recovery is strengthening.
The S&P/Case-Shiller index of home values jumped 5.5 percent from November 2011, slightly missing projections from economists but still the largest year-over-year gain since August 2006, the report noted.
Prices on a month-over-month basis slipped slightly, but economists blamed the decline on seasonal weakness in real estate rather than evidence of a fundamental reversal of the housing recovery.
"Winter is usually a weak period for housing which explains why we now see about half the cities with falling month-to-month prices compared to 20 out of 20 seeing rising prices last summer," David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said in a statement. "The better annual price changes also point to seasonal weakness rather than a reversal in the housing market."
But while experts anticipate prices to continue rising throughout the year, the tight supply of homes for sale could limit gains for the housing market overall. Pending home sales data from the National Association of Realtors released Monday showed a slight decline in contract signings, which real estate agents blamed on a lack of supply of homes for sale rather than demand.
Thus far, experts have credited the robust gains in the homes sales and property values to healthy investor interest in real estate, largely driven by the rising number of renters and rent prices coupled with low mortgage rates.
But as investors and hedge funds have dominated the market with cash offers on affordable homes, the available supply of homes has dwindled, pushing out the important set of first-time homebuyers. High levels of negative equity across the country continue to trap some would-be sellers in their homes, further constraining the supply of homes for sale.
"The supply limitation appears to be the main factor holding back contract signings in the past month," NAR Chief Economist Lawrence Yun said in a statement Monday. "Supplies of homes costing less than $100,000 are tight in much of the country, especially in the West, so first-time buyers have fewer options."
Yun and others expect the strong spring real estate season will bring more homes on the market slightly easing the inventory issues, but overall, prices are still expected to head up for the rest of the year.
"We do expect appreciation for the full year of 2013 to be much more moderate as these home price gains pull some sellers back into the market and new construction picks up," Stan Humphries, chief economist at real estate website Zillow, said in an E-mail. "Annualized appreciation will get even higher before the year is over."
But while the largest metro areas in the country are seeing healthy year-over-year price gains, the recovery overall is still fragmented. Real estate is appreciating much faster in larger cities with attractive investment options, better economies and stronger job growth, experts say.
"It's a further indication of a separation between the haves and have-nots," John Tashjian, principal at New York City-based Centurion Real Estate Partners, said in an E-mail. "Only when consumers are able to enter the market through better financing and increased job growth will we see the rest of the country catch up with the larger [metro areas]."