Home prices in large U.S. cities posted strong annual gains in October but slowed from a month earlier, according to a leading gauge, reflecting a seasonal cooling and the struggles of home buyers in a pricier market.
But over the month there was a cooling trend. Prices increased just 0.2% from September, less than economists had expected. That comes after a 0.7% rise in September.
The data mirror a trend in recent months, which have seen slowing month-over-month price gains. In nearly half the cities surveyed, prices actually fell slightly in October from September.
"Monthly numbers show we are living on borrowed time, and the boom is fading," David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a statement.
The housing market rebounded sharply earlier in 2013, as families and investors rushed in, attracted by rock-bottom interest rates and the belief that the bottom of the market had passed. A shortage of homes for sale led to bidding wars and rapid price appreciation.
The cooling since then reflects both a typical seasonal slowdown and waning demand because of higher prices and interest rates.
"In late summer and early fall, the pace of increases has clearly slowed," said Thomas A. Lawler, founder of research firm Lawler Economic & Housing Consulting.
Economists expect prices to rise over the next year at a moderate pace.
The Case-Shiller index, created by economists Karl E. Case and Robert J. Shiller, is widely considered the most reliable read on home values. The housing index compares the latest sales of detached houses with previous sales, and accounts for factors such as remodeling that might affect a house's sale price over time.
As of October, average home prices across the big cities were back to their mid-2004 levels, according to the index.
Over the year, Western metro areas continued to lead the recovery. Many regions have seen heavy demand from investors purchasing large numbers of homes to rent or flip. Prices in Las Vegas jumped 27.1% since October 2012; in San Francisco, 24.6%; Los Angeles, 22.1%; and San Diego, 19.7%.
Although price increases slowed on a non-seasonally adjusted basis over the month, adjusted for seasonal fluctuations the 20-city index posted a more robust 1% monthly gain, the same as in September.
S&P, however, recommends not using those figures because foreclosures have skewed the data. But with the foreclosure crisis shrinking fast, those numbers should become more reliable.
On a seasonally adjusted level, many cities, including Los Angeles, continue to see unsustainable price growth among more affordable homes, a favorite target of investors, said Dean Baker, co-director of the Center for Economic and Policy Research.
"I think there is real concern, in a lot of these markets, that things are getting out of hand again," he said.
The Case-Shiller data lag behind other economic indicators. The index reflects closed sales and provides a three-month moving average. The spring home-buying season will provide a clearer picture on the housing recovery's health.
More recent economic data than the Case-Shiller index have painted a mixed picture. Sales of new homes and construction have been strong. But sales of previously owned homes, adjusted for seasonal swings, have gone the other direction, a trend that the National Assn. of Realtors has blamed on higher mortgage rates and a tight supply of homes for sale.
Those falling sales, Lawler said, indicate that "some of the incredible price increases we have seen may have been a little too much."