Home prices rose 4.5% year-over-year in October, compared to a 4.8% yearly gain in September, the Case-Shiller index revealed. The index measures prices in 20 metropolitan cities.
"While the big picture is home prices are still rising, but more slowly than last month, we actually saw eight of the 20 cities where the pace picked up a little bit," said David Blitzer, chairman of the index committee at S&P Dow Jones Indices in an interview with TheStreet. "There's a chance that we may be headed for a period where home prices will not only drift down, but actually could bottom out and we could see some bigger increases going forward."
The index has made a dramatic 29.3% recovery since its March 2012 low.
While the broader economy is showing plenty of signs of strength, from record stock prices to impressive GDP growth, plenty of Americans are still renting. Renters spent $21 billion more in 2014 than they did in 2013, according to a Zillow report. Amid slow wage growth, saving for a down payment on a home is a daunting task.
"[Rental growth] has also been a bitter pill to swallow for tenants, particularly those on an entry-level salary and those would-be buyers struggling to save for a down payment on a home of their own," said Zillow Chief Economist Stan Humphries. "Next year, we expect rents to rise even faster than home values, meaning that another increase in total rent paid similar to that seen this year isn't out of the question."
Blitzer doesn't view the rise in renting as a threat to the housing market.
"The strength in the economy clearly is only beginning to seep down to the middle and lower income segments, which is driving renting -- but that's not the problem, that's just a symptom," he told TheStreet.
Mortgage rates stand at just 3.83%, according to Freddie Mac. As the Federal Reserve is expected to raise short-term interest rates in 2015, the fear of rising rates could attract people who have been sitting on the sidelines to enter the market before a potential rate hike.
But Blitzer isn't so convinced this fear acts as a boon to housing.
"Fed watchers since May 2013 have been saying the rate hikes are coming and it hasn't come yet," he said. "I think they have to tighten before you see mortgage rates move and people react to it, so that won't pop housing in the next six months."
-- Written by Scott Gamm in New York.