U.S. home prices rose by their fastest pace in more than seven years during July, though there were some signs of a moderation in some regions, according to a widely watched index released Tuesday.
Prices in 20 major cities increased 12.4% in July compared to the same month last year, according to the Standard & Poor's/Case-Shiller index.
Home-price inflation has accelerated sharply over the past year as more buyers have chased a shrinking supply of homes for sale. Fewer properties are selling out of foreclosure and until May, mortgage rates had hovered near record lows, enabling buyers to qualify for slightly more debt without increasing their monthly payments much.
Tuesday's report hinted at a possible slowdown in the rate at which prices are going up. While all 20 cities tracked by the Case-Shiller index gained in July, the pace at which prices rose slowed in 15 cities. Mortgage rates have increased by more than one percentage point since early May, leading to declines in home-buyer traffic and in new mortgage applications during August.
"The slowing in monthly gains is not a nail in the recovery's coffin," said Bill Banfield, director of capital markets at Quicken Loans. "In fact it shows a normalizing of the market and that this growth can be sustained."
Home prices rose 1.8% in July from June. While that was slower than the month-over-month increases in the previous three months, prices tend to rise fastest in the spring, and they typically peak in June. The 1.8% gain in July was still the largest June-to-July increase since the 20-city index began its count in 2000.
The Case-Shiller index tracks home prices on a three-month moving average; Tuesday's report measured prices on home sales that were recorded in the May-to-July period, and buyers would have closed on contracts to buy those homes one or two months before then.
For the 20 cities tracked in the index, home prices are up 21.2% since March 2012, when prices hit bottom. Prices are still down 21.3% from their June 2006 peak.
Year-to-date home-price gains show even more acute home-price inflation. Since the beginning of the year, home prices have shot up 11.2% through July. That's the second-largest gain in the past 12 years, outpaced only by the 11.3% year-to-date gain for July 2004.
Prices are up most sharply in many of the Western and Southwestern markets that saw some of the biggest declines. Prices have jumped 27.5% in Las Vegas over the past year, while San Francisco gained 24.8% and Los Angeles 20.8%.
There are growing signs that rising home prices have led some investors to step back from the market. Rising mortgage rates may have accelerated purchases by some homeowners who planned to buy later this year, but they have also eased the frenzied competition for homes in some of the hottest housing markets, according to real-estate agents and executives. A rule of thumb holds that every one-percentage point increase in mortgage rates makes homes about 10% more expensive for buyers.
With prices up by double digits from one year ago, rising rates have been "almost like a red light on the frantic price inflation," said Ivy Zelman, chief executive of Zelman & Associates, a research and advisory firm.
"I hear more often now from builders, "We pushed prices too far,'" she said. "Consumers got sticker shock."
A separate index released Tuesday showed that U.S. home prices rose 1% on a seasonally adjusted basis in July and stood 8.8% above their year-earlier levels. The Federal Housing Finance Agency home-price index showed that prices stood just 9.6% below its April 2007 peak and was at the same level as March 2005.
Write to Nick Timiraos at [email protected]