Home prices rise, but more slowly

The good news for American property owners is that home prices continued to rise in October. Now, the not-so-good news: that 4.5 percent jump in October, as tracked by the S&P/Case-Shiller index, represents the 11th straight month of slowing growth.

That means that while prices continue to appreciate in the 20 cities tracked by the index, the jumps aren't as favorable as they were a year earlier. The slowdown in growth may raise questions about the vitality of the housing market, although S&P Dow Jones Indices suggested that the numbers may bode well for the end of 2014 and start of 2015.

"We are seeing hints that prices could end 2014 on a strong note and accelerate into 2015," David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said in a statement. He added, "Most national economic statistics, other than those connected to housing, posted positive reports in November and early December."

Each of the 20 cities tracked by the index posted positive year-over-year gains, with the highest jumps seen in Miami and San Francisco, where housing prices rose 9.5 percent and 9.1 percent, respectively. The smallest rise was recorded in Cleveland, where home prices rose 0.9 percent in October when compared with a year earlier.

Cities with geographic or legal constraints that hamper new building projects, such as San Francisco, as well as "hip" cities where gentrification is pulling in new residents, such as Portland, saw the biggest rises in home prices, noted IHS Global Insight US economists Patrick Newport and Stephanie Karol in a research note.

"Less trendy cities with fewer restrictions and more space to sprawl (Charlotte, Phoenix or Minneapolis) are seeing slow, but steady, growth," the IHS economists said.

The rise in residential real estate prices is also illustrating a good news/bad news trend for some homeowners. Higher-priced homes are almost back to recouping their losses from the housing crash, while some lower-cost homes are still below water given that their prices dropped more when the crisis hit.

"In most of the 20 cities covered by the index, people in lower-priced or mid-range homes have only seen their home values rise back to 2001 levels," Karol and Newport pointed out. "Many people who purchased their homes after 2001 cannot currently sell without taking a loss -- and this problem is concentrated among the homeowners who can least afford to do so."

While mortgage rates remain historically low, there are some impediments to home buying, such as stricter mortgage standards and weak wage gains. That may impact some buyers' ability to keep up with rising home prices.

Conversely, a slowdown in price hikes may be a positive for the housing market, Peter Boockvar, chief market analyst with economic research firm The Lindsey Group, said in commenting on the latest Case-Shiller numbers.

"Lower home price growth is a necessary component in an eventual sustainable improvement in home sales, as too many first-time buyers have been priced out of the market," he said in a note. "Hopefully we can soon once again align home price growth with income growth."