Home prices in the U.S. climbed at a slower pace in the year through December, indicating the market is entering a new stage that will help sustain further progress.

The S&P/Case-Shiller index of property values in 20 cities rose 13.4 percent from December 2012 after increasing 13.7 percent in the year ended in November, the group said in New York. It was the first deceleration since June. The gain matched the median estimate of 33 economists surveyed by Bloomberg.

Price appreciation is slowing as rising mortgage rates combined with harsh winter weather to cool home purchases over the past few months. Smaller increases mean more homes will remain affordable as the labor market improves, helping maintain the rebound in residential real estate that has boosted growth.

“The housing recovery continues, but perhaps not as vigorously as it did in the first half of last year,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. and the best forecaster of the home-price index during the past two years, according to Bloomberg calculations. “Even so, appreciation trends still look pretty good even though they may not be as strong as they were.”

Stock-index futures trimmed earlier losses after the report. The contract on the Standard & Poor’s 500 Index maturing in March was little changed at 1,845.3 at 9:16 a.m. in New York.
Estimates in the Bloomberg survey ranged from year-over-year gains of 10 percent to 13.9 percent. The Case-Shiller index is based on a three-month average, which means the December figure was also influenced by transactions in November and October.

National Data

The S&P/Case-Shiller report also included quarterly figures for the market nationally. Prices covering all of the U.S. climbed 11.3 percent in the fourth quarter from the same period in 2012, compared with an 11.2 percent gain in the quarter ended in September.

Home prices adjusted for seasonal variations increased 0.8 percent in December from the prior month after climbing 0.9 percent in November.

The month-over-month price gains in cities were led by Miami, which showed an adjusted 1.2 percent advance, followed by 1.1 percent gains in Detroit and San Francisco. Cleveland was the only city to show a decrease.

“Gains are slowing from month-to-month and the strongest part of the recovery in home values may be over,” David Blitzer, chairman of the S&P index committee, said in a statement. “Higher home prices and mortgage rates are taking a toll on affordability.”

Unadjusted Data

Unadjusted prices decreased 0.1 percent in December from the prior month, the same as in November, the report showed.

The year-over-year gauge, which uses records dating back to 2001, provides better indications of trends in prices, according to the S&P/Case-Shiller group. The panel includes Karl Case and Robert Shiller, the economists who created the index.

All cities in the index showed a year-over-year increase, paced by gains of 25.5 percent in Las Vegas and 22.6 percent in San Francisco. Cleveland showed the smallest increase at 4.5 percent.

As Federal Reserve policy makers continue paring back their stimulus program, higher mortgage rates may limit gains made in household equity. Borrowing costs for prospective buyers have climbed since Fed officials last year signaled they would pare purchases of mortgage-backed securities and other bonds, a process that began in January.

An added challenge comes as the central bank tries to move away from its unemployment threshold of 6.5 percent without raising expectations of an increase in the short-term interest rate, according to minutes of their January meeting.

Mortgage Rates

The average rate on a 30-year, fixed-rate purchase loan was 4.33 percent in the week ended Feb. 20, up from 3.56 percent around the same time a year ago, according to McLean, Virginia-based Freddie Mac. After reaching a four-month low of 4.10 percent at the end of October, the average rate rose to 4.53 percent at the start of this year.

Harsh winter weather in much of the U.S. risks further restraining the housing market. January was the coldest start to a year since 2011, according to the National Oceanic and Atmospheric Administration.

Sales of previously owned U.S. homes dropped 5.1 percent in January to a 4.62 million annual rate last month, the fewest since July 2012, figures from the National Association of Realtors showed last week.

Fewer Sales

New home sales are projected to fall 3.4 percent to a 400,000 annualized pace in January from the month before, according to the median forecast of economists surveyed by Bloomberg before the Commerce Department figures tomorrow. That would be the slowest pace since August.

While D.R. Horton Inc., a Fort Worth, Texas-based homebuilder, expects to have some pricing power in 2014, momentum will probably slow, Chief Financial Officer Bill Wheat said in a Jan. 28 earnings call.

“Seeing early results that point toward a strong spring, we would expect to continue to see some further pricing increases over our current levels, but perhaps not the same pace we saw last year,” Wheat said in the call.

Higher home prices are needed to help sustain gains in household wealth, which would in turn stoke consumer spending. Net worth for households and non-profit groups rose by $1.92 trillion in the third quarter, or 2.6 percent from the previous three months, to $77.3 trillion, according to Fed data.

Household real-estate assets climbed by $428.5 billion, the data show. Owners’ equity as a share of total household real-estate holdings increased to 50.8 percent last quarter from 49.7 percent in the previous three months.