Buying ain’t easy. First prices soar, then they slow down, but rising interest rates make up the difference.

Blanca Torres
Reporter- San Francisco Business Times

Email
 | Twitter
 | Google+
 | LinkedIn

The rapid rise of home prices may be slowing, but too bad interest rates are now creeping up.

In the Bay Area, home prices are still growing, but not as fast, according to Trulia, the San Francisco-based online real estate marketplace.

The firm found that while home prices jumped 17.2 percent in the month of July compared with July 2012, price growth slowed down during the last six months. From January to March, prices rose by 6.5 percent and from April to June, they went up 3 percent.

“The biggest price slowdowns have come to some of the hottest local markets,” said Jed Kolko, Trulia’s chief economist. “California and Nevada remain the Wild West for asking home prices, with some of the sharpest drops during the bust, strongest rebounds over the past year, and now biggest slowdowns in the past quarter.”

Nationwide, asking home prices dropped slightly— 0.3 percent — in July compared with the previous month. It’s the first time since November 2012 that prices didn’t go up.

They are still up 11 percent for the month of July compared with the same month last year.

One major factor deflating home prices is rising interest rates during the past six months.

In the past couple of years, historically low interest rates boosted sales and skyrocketing price growth, but higher rates are now dampening the mood.

“Asking home prices are now starting to lose steam as mortgage rates rise, inventory expands and investor demand declines,” said Trulia in a recent market report.

A year ago, a buyer could afford to pay a higher asking price because interest rates were low. Now, buyers may end up paying the same per month, but more of their payment will go toward interest versus the principal value on the loan.

So even if prices level off or go down in the months to come, buying a home in the Bay Area will still be just as costly if not more.

Blanca Torres covers East Bay real estate for the San Francisco Business Times.

Article source: http://www.bizjournals.com/sanfrancisco/blog/real-estate/2013/08/bay-area-home-price-growth-leveling-off.html