Rise in New-Home Prices Slows, Report Shows

The rise in new-home prices may be slowing, a government report suggested Wednesday.

The U.S. Census Bureau’s constant quality price index of new single-family homes rose 0.6% in the third quarter after a 2.5% gain from April through June. The increase was the smallest since the second quarter of 2003, when prices were unchanged.

The report adds to evidence that the housing market is cooling as increases in prices and interest rates make homes less affordable. Housing affordability fell to near a 14-year low in the second quarter, according to the National Assn. of Realtors.

“Prices have gone so far out of whack compared to where incomes are, that increases have to slow,” said Carl Steen, an analyst at Maria Fiorini Ramirez Inc. in New York. “This is highly indicative of a coming slowing in housing.”

Although the quarterly increase in prices was the lowest in two years, year-over-year prices still reflect strong appreciation in home values. From the third quarter of last year to the same period this year, prices rose 7.4%.

Sales of new and existing homes probably will decline in 2006 after reaching a record 8.41 million this year, the National Assn. of Realtors said Friday.