Home Prices Are Becoming More Stable, Says Trulia

None of the country's largest housing markets saw home price increases of more than 20 percent in the past year, according to Trulia.

Asking home prices in local U.S. markets rose in May a median of 8 percent compared with a year ago, representing the slowest rate in 13 months, according to a monthly Trulia study of housing prices in the largest American cities. No market saw home price increases of more than 20 percent, and just four cities experienced price declines.

The study suggests there has been less volatility in home prices, which is a good sign for the health of the housing market, according to Jed Kolko, chief economist at San Francisco-based Trulia.

“When people expect price increases like that to continue, some people might pull homes off the market in anticipation of further price increases,” Kolko says. “In markets where the supply is already tight to begin with, it makes it even harder for buyers.”

Furthermore, Kolko says, large price increases can “fuel unreasonable expectations about where prices are going to go in the future. When people expect prices will rise by huge amounts, they might start to bet on that and try to get into a home they might not be able to afford,” he says.

At 18.8 percent, Riverside-San Bernardino, California, saw the biggest increase in asking home prices since last year, followed by a 16 percent rise in Bakersfield, California.

Only 4 of the 100 largest U.S. metropolitan areas saw declines in asking home prices – El Paso, Texas; Hartford, Connecticut; Albany, New York and Little Rock, Arkansas – and that’s the lowest number of markets experiencing a decline in prices since before the Great Recession, according to the Trulia data.

The report also showed that monthly rental rates rose 5.1 percent nationwide from a year ago, with the 25 largest markets all experiencing price hikes. Kolko says the rise is a result of a combination of increased demand from young Americans finding work and living on their own, as well as of that demand outpacing the available supply.

“In 2013 the number of new apartment units under construction hit a 15-year high, but not all of those have hit the market yet,” he says. “It takes about a year on average between when apartment buildings are started and when they’re completed. We will see more apartment rentals coming onto the market.”

Tightened lending standards and student debt burdens could be affecting Americans’ decisions to rent rather than buy. A Census report in April showed homeownership was the lowest since 1995, and was the lowest on record for Americans 35 and under.

Year-over-year rents rose by the most in four California metropolitan areas: San Francisco, San Jose, San Diego and Oakland. In San Francisco, the median rent for a two-bedroom unit rose 15.6 percent from a year ago and was $3,550, the highest in the country.

Of the 25 largest markets examined, Las Vegas came in with the lowest rent, $950, slightly more than a 3 percent increase from the same time last year. When expanded to include the 100 largest markets, Bakersfield, California, and Dayton, Ohio, had the lowest rent, with a median price of $750. Monthly rent prices declined in May in eight U.S. cities, falling the largest amount – 4 percent – in Milwaukee, where median rent was $1,900 for a two-bedroom home.