In another sign the U.S. housing market is returning to normal, Las Vegas and Phoenix -- poster children of the bubble and bust -- are looking average.
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The S&P CoreLogic Case-Shiller Indices, which covers home-price fluctuations in the entire nation, rose 5.8% in the 12 months ended in March, the fastest rate in 33 months.
The price increases were in line with price growth in the country's biggest boom-bust markets. Home prices in Las Vegas rose 6.4% over the year, while those in Phoenix rose 5.6%, according to Case-Shiller.
The relative steadiness comes after a 15-year stretch when the two markets were leaders of the U.S. housing bubble, bust and recovery, helping pull the national averages up, down and up again.
"In the boom and the bust they were clearly the incredibly hot spots," said David Blitzer, managing director at S&P Dow Jones Indices. "They're no longer so outstanding and unusual."
Las Vegas home prices hit their peak growth rate the summer of 2004, rising 53% annually, while Phoenix prices reached 49% annual growth about a year later.
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Their falls were almost as dramatic. Las Vegas home prices posted a 33% annual decline in December 2008 while Phoenix prices plummeted 36% a few months later, on an annual basis.
Investors bet on Las Vegas and Phoenix during the last housing boom, expecting aging baby boomers to flock to the Sunbelt states. Relatively affordable home prices also made it easy for people with middle-class salaries to snap up second or third homes. But the availability of land meant there were few constraints on new construction, leading to a bigger crash.
Despite the strong rally of the past five years, neither city is close to its previous peak. Las Vegas prices remain a third below their 2006 high while Phoenix prices remain 27% below.
The distance from the previous peak isn't necessarily the best measure of health, since both markets likely were overvalued.
"It should be no surprise that it would take them a long time to get back there, if ever," Mr. Blitzer said. "There are things that don't come back, or don't come back in less than a generation."
Today, the new booming markets look comparatively restrained, and areas where price gains are concentrated are generally ones with strong job growth and limited supply, not speculative investment and overbuilding.
Across the country, Seattle led the way in March with a 12.3% home-price increase. Portland reported a 9.2% year-over-year gain and Dallas, which recently replaced Denver in the top three, posted an 8.6% annual increase.
After seasonal adjustment, 17 of 20 cities saw prices rise in March.
Nationally, home-price growth remains less than half of what it was during the housing bubble in the mid-2000s. Back then, prices increased by more than 14% for much of 2005.
Overall, the housing market is gaining strength, but there are signs that price growth is starting to take a toll on buyer demand. The pace of sales of existing homes declined 2.3% in April as buyer frustration mounted over rising prices and a lack of homes for sale, the National Association of Realtors said last week. New home sales declined 10.4% last month due to similar challenges, according to the Commerce Department.
There are reasons for concern, economists said. Home prices in the past year rose roughly three times faster than incomes. Mortgage rates, which last week averaged 3.95% for a 30-year loan, are expected to rise closer to 4.5% toward the end of the year, which could further hurt affordability.
Las Vegas is seeing some bidding wars and price rises that are faster than wage growth. But local Realtors said this time the boom in Las Vegas isn't being driven by speculative deals. Nevada led the way in job growth in 2016 after ranking last among the states in 2009 and 2010, according to a survey by Gallup.
Most homes on the market for less than $300,000 are receiving multiple offers, with some receiving as many as 10 bids, said David Tina, president of the Greater Las Vegas Association of Realtors.
Buyers, he said, "have short memories, which is good."
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(END) Dow Jones Newswires
May 30, 2017 15:08 ET (19:08 GMT)