The slowdown in price appreciation has helped make homes more affordable. Mortgage rates have also fallen since January. Cheaper homes and lower rates appear to be reversing last year's sales slump. Sales of existing homes soared in February, though they remain slightly below where they were a year ago.
Some red-hot markets have cooled off. Home prices in Seattle rose just 4.1 percent in January from a year ago, compared with a 12.8 percent gain in January 2018. And in San Francisco, where the typical home costs well over $1 million, the annual price increase was 1.8 percent in January, down from a 10.2 percent increase a year earlier.
Las Vegas reported the sharpest increase in January from a year ago at 10.5 percent, followed by Phoenix with 7.5 percent and Minneapolis at 5.1 percent. Home prices are now rising at roughly the same pace as incomes, a remarkable shift after six years of increases that far outpaced wages. Average hourly earnings rose 3.4 percent in February from a year ago.
Mortgage rates jumped roughly a full percentage point last year, peaking at nearly 5 percent in November. That throttled home sales, which fell 3.1 percent in 2018. But rates have since slipped to 4.28 percent for an average 30-year fixed rate mortgage. Rates will likely fall further as the Federal Reserve has signaled it may not raise short-term rates at all this year.
Lower rates haven't yet turned around home construction, which is being held back by higher prices for labor and land. The number of new homes under construction plunged 8.7 percent in February, the government said Tuesday.