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Home Prices Growing at a Slower Pace

According to a recent Case-Shiller home price report, home prices across the country are increasing at a slower rate. In the first quarter of 2014, the National Index gained only 0.2%. Nineteen of the twenty cities studied showed positive returns in March - New York City was the only to decline, while Dallas and Denver reached new index peaks.

One of the indices used to determine the health of the real estate market is the year-over-year returns on home prices. Year-over-year performance is frequently used by investors seeking to gauge whether financial performance is improving or worsening. For example, a business may report that its revenues have increased for the third quarter on a year-over-year basis for the last three years. This means that revenues at that company in the third quarter of year three were higher than revenues in the third quarter in year two, which were higher than revenues in the third quarter of year one.

Chicago showed the highest year-over-year return since December 1988, clocking in at 11.5%, while Cleveland showed the lowest year-over-year return, at 3.9%, for the 12 months ending in March 2014.

Among the markets showing substantial slowdowns in price gains were some of the nation's leading boom-bust markets, including Las Vegas, Los Angeles, Phoenix, San Francisco, and Tampa.

Zillow chief economist Dr. Stan Humphries explains that this deceleration of growth is due to a mixture of low prices, low mortgage rates, and "stubbornly high negative equity." There is hope, however, because though it will not happen overnight, the housing market is well on its way back to being driven by fundamentals like income growth and rising household formation.


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