Home prices entered this year with a modest tailwind, climbing at an annual rate of 1.4 percent over the final three months of 2014, the Federal Housing Finance Agency reported Thursday.
The price of a home sold in December also rose, by 0.8 percent over the prior month. The year-over-year increase in home prices from 2013 to 2014 was 4.9 percent, the FHFA said in a report.
“Contrary to prior indications of a possible slowdown, home price appreciation in the fourth quarter was relatively strong,” Andrew Leventis, the FHFA’s economist, said in the report. “The key drivers of appreciation over the last few years_ low inventories of homes available for sale and improvement in labor markets_ likely played a role in driving up prices during the quarter.”
The modest rise in home prices suggests there’s a bit of push behind sales this year. But as Leventis noted, the inventory of homes for sale remains subdued, meaning fewer homes available for sale are driving up prices not strong buyer demand.
Just two months into 2015, many economists are predicting that the housing sector will again disappoint this year. Sales of existing homes fell in January to their lowest level in nine months, dropping 4.9 percent to 4.82 million according to data Monday from the National Association of Realtors.
In spite of that monthly decline, sales of existing homes in January were up 3.2 percent from a year earlier.
A wildcard for housing this year is the Federal Reserve, which is expected to begin hiking its benchmark interest rate as early as June. This rate has been near zero since December 2008, and when it starts to rise_ a sign of an improving economy_ it will raise the cost of borrowing for homes, cars and other big-ticket items.
“The big test for housing will be affordability once (lending) rates rise,” said Lawrence Yun, the Realtors’ chief economist.