The S&P/Case-Shiller Home Price Index data for June are out.
The headline 20-city composite index rose 12.07% year over year in June, slowing from May’s upward-revised 12.20% advance and missing estimates for 12.10% gains.
The absolute level of the index, however, came in at 159.54, above expectations for a 159.30 reading, as May levels were revised upward slightly to 156.18 from 156.14.
In July, new home sales plunged more than 13% — way worse than expectations for a 2% drop — raising fears that the Federal Reserve’s plans to taper back its quantitative easing program in the second half of the year could be having a much-worse-than-expected impact on the housing market via higher interest rates.
“There is a debate on whether the weakening sales in housing markets reflect housing price or demand, so price indicators are the key to unravelling what is driving weak sales,” says Citi strategist Steven Englander. “Case-Shiller is for June so not as timely as other indicators but is viewed as the best read on prices.”
Below is commentary from the release (emphasis added):
“National home prices rose more than 10% annually in each of the last two quarters,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “However, the monthly city by city data show the pace of price increases is moderating.
“The Southwest and California have consistently led the recovery with Las Vegas, Los Angeles, Phoenix and San Francisco posting at least 15 months of gains. Looking at the cities, New York recorded its highest monthly return since 2002. Atlanta was up the most at +3.4% and Washington DC had the lowest return at +1.0%. In terms of annual rates of change, San Francisco lost its leadership position with Las Vegas showing the highest post-recession gain of 24.9%.
“Overall, the report shows that housing prices are rising but the pace may be slowing. Thirteen out of 20 cities saw their returns weaken from May to June. As we are in the middle of a seasonal buying period, we should expect to see the most gains. With interest rates rising to almost 4.6%, home buyers may be discouraged and sharp increases may be dampened.
“Other housing news is positive, but not as robust as last spring. Starts and sales of new homes continue to lag the stronger pace set by existing homes. Despite recent increases in mortgage interest rates, affordability is still good as credit qualifications have eased somewhat.”