Home prices rose 4.7 percent in December, according to CoreLogic. of which can be the smallest annual gain since August 2012.

Prices are still rising because of the shortage of homes for sale, especially on the lower end of the market. however rising mortgage rates took their toll on affordability last year, causing sales to slow. Prices usually lag sales by several months.

“Higher mortgage rates slowed home sales as well as cost growth during the second half of 2018,” said Frank Nothaft, chief economist for CoreLogic. “Annual cost growth peaked in March as well as averaged 6.4 percent during the first six months of the year. from the second half of 2018, growth moderated to 5.2 percent. For 2019, we are forecasting an average annual cost growth of 3.4 percent.”

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The pullback currently means of which fewer markets are considered overvalued. Of the nation’s top 50 markets based on housing stock, 40 percent were overvalued, 18 percent were undervalued as well as 42 percent were at value. A year ago, more than half of the nation’s largest markets were overvalued. A market can be considered overvalued when home prices are at least 10 percent above the long-term, sustainable level.

cost gains are shrinking in most markets, however prices are on the verge of falling in some of the formerly hottest markets, such as California.

The median cost paid for all Southern California homes sold in December was $515,000, up just 1.1 percent year over year.

“The roughly 1 percent annual increase in Southern California’s median sale cost last month marked the lowest such gain from the uninterrupted string of year-over-year increases each month of which began in April 2012,” said Andrew LePage, a CoreLogic analyst. “The median’s annual increases have declined over the past year as home sales slowed as well as inventory rose. The median’s tiny annual gain last month also reflects a shift in market mix, where higher-end sales represented a slightly lower share of all activity compared with December 2017.”

The pullback in home prices certainly helps the tough affordability of which has plagued the housing market for the past few years, however of which also has some buyers holding off as they wait for prices to fall further.

There continues to be a mismatch between the strong demand for entry-level homes as well as the short supply available for sale.