Several reports were released Tuesday that implied continued success for home prices in the U.S. — a sign that the housing market is back on its feet. The Federal Housing Administration house price index and the Standard & Poor’s/Case-Shiller HPI, both out Tuesday, followed suit.
According to the FHA price index, U.S. house price appreciation continued in July 2013, up 1% on a seasonally adjusted basis from the previous month, marking the 18th consecutive monthly price increase in the purchase-only, seasonally adjusted index.
On an annual basis, home prices were up 8.8% compared to July 2012. The U.S. index is 9.6% below its April 2007 peak and is roughly the same as the March 2005 index level.
The monthly S&P/Case-Shiller 20-city home price index improved 0.62% in July, falling short of the 0.8% expected rise. Falling in line with the FHA HPI, the S&P/Case-Shiller July index marked the 18th consecutive monthly increase as well.
Year-over-year the 20-city index saw the largest annual increase since early 2006, up 12.39%, slightly higher than June’s pace of of a 12.07% increase.
While all 20 of the cities in the index posted positive price gains in July, it is important to note that the monthly gains in 15 of the 20 cities were less than the price appreciation seen over June’s time. Essentially, the upward momentum in price gains slowed from June to July.
Las Vegas reported the largest price gain, with home prices soaring 28% since last year. Coming in a close second, San Francisco prices are up nearly 25% year-over-year.
Reactions to the S&P/Case-Shiller report were positive among professionals in the housing industry.
Quicken Loans Director of Capital Markets Bill Banfield believes the market is beginning to show signs of normalcy finally. “Home prices continued their strong year-over-year climbs, but month-over-month gains slowed. The slowing in monthly gains is not a nail in the recovery’s coffin, in fact it shows a normalizing of the market and that this growth can be sustained.”
“Amid a rising rate environment, potential homebuyers rushed into the market to take advantage of record low borrowing costs,” said Lindsey Piegza, managing director and chief economist at Sterne Agee. "Of course looking at these figures today we know they are lagging by two months giving us a look in the rear view mirror rather than a sense of what's to come."
Piegza added, "This certainly is not enough to pull the rug out from under the housing recovery, but it will be enough to deter some potential buyers or result in a reduction in spending elsewhere on other goods and services."
"Rising mortgage rates are likely pulling back demand and pricing power in the housing sector but, at least up to July, only to a limited degree," said analysts at Econoday.
Zillow (Z) Chief Economist Stan Humphries noted that more recent reports further illustrate a summer-long trend of slowing monthly appreciation in the face of a more than 100 basis point hike in mortgage interest rates beginning in late spring.
“Looking ahead, I expect the pace of home value appreciation to continue to slow as more supply comes on line and mortgage interest rates remain above their recent lows, even as the Federal Reserve steps back from immediate tapering plans. This ongoing moderation is good for the market overall," said Humphries.
