Home price gains continued to slow in January, but some economists say this is actually a good thing for the housing market.

The S&P Case Shiller National Index posted a 4.3% annual gain. The slowing of growth began at the end of 2018 and has continued through the beginning of 2019. Last year at this time, prices were rising at 6.3%.

The slower growth is a normalization of home-prices from the unsustainability of the past few years.

The index numbers are reflecting what the housing market is expected to look like in the current economy. Home-prices and wages were out of sync, making an unrealistic economy for working people to buy homes. The economy is showing strength with low unemployment and a solid job market. This month, mortgage rates have begun to fall and the Federal Reserve announced that it intends to keep interest rates steady for the rest of the year.

Slower price gains have helped potential buyers have more negotiating power as they shop for a house and will bring more people into the buying market. Some economists think the changing housing market is a sign that there needs to be more affordable housing that is in line with wage growth.

“For homebuyers and home builders, this is music to their ears,” said Russell Price, chief economist at Ameriprise Financial Inc.

The biggest drops in price gains have been in the markets that Price described as showing outsized gains in the last year, like San Francisco. Home-prices there have dropped 1.58% in the last 3 months.

The Case-Shiller National Housing Price Index is a monthly indicator of price change on previously-owned homes.

Charles Dougherty, an economist at Wells Fargo, said that the slower growth is nothing to worry about; it is good for the economy that homes are more affordable.

People are taking advantage of the higher home prices in more expensive markets. They are selling their homes before the prices begin to fall.

Kim Nelson was closing on her home in Berkeley, California this week and she was relieved that she sold when she did. It was a hard decision for her, after spending the past 20 years in California between Santa Cruz and the East Bay, but she just couldn’t afford the incredibly high mortgage rates she was getting. Her mortgage rates were substantially higher than normal between 8.9% to 10%. She said that she couldn’t refinance because she is a single mother who is self-employed as an artist. She waited until her son was out of high school to sell her home but she wanted to take advantage of the rising prices as soon as she could.

“I did the right thing,” she said from her new home in Rochester, N.Y. She decided to move to upstate New York last year after spending some time there at an artist retreat. She had seen a house for sale complete with an old barn – perfect for a workshop.

She was able to sell her Berkeley home for over $1 million and buy her new place in Rochester for around $230,000. The houses are nearly equal in square footage, she said.

Housing-price growth was continuing a unsustainable rise at the beginning of 2018. More expensive homes were dominating the market and affordability was continuing to be a problem.

Mortgage rates began to rise in January from 3.95% and peaked at 4.95% in November of last year, making it harder for people to buy. The average 30-year fixed mortgage rate started the month at about 4.05% and has been steadily falling since, according to Fannie Mae.

Mortgage applications are up nationwide, which is an encouraging sign, said Evercore ISI managing director and economist/strategist Stan Shipley.

He is optimistic about the next six to nine months of housing growth. He said that the country needs more homes because the demand is growing.

“Affordability has improved in the last three months,” he said. “But we just aren’t building enough houses. We should be building 1.5 million houses a year but we are closer to 1.2 million currently.”

Too much home-building was one of the reasons for the Great Recession, which began in 2009 and lasted into the early 2010’s. At the peak of the recession, rental vacancy rates were in the double digits.

Vacancy rates – both rental and homeowner – can help determine if there is too much or too little housing available.

David Berson, chief economist at Nationwide, said that there is a “sweet-spot” between what is being built and what the market is demanding.

The housing market hasn’t hit that sweet spot yet. But with steadier growth and normalization with wages, it is better for both buyers and builders.