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Home prices continue improving but at a slower pace

Home prices have been improving this year, giving many hope that the sector is in recovery mode. The pace is slowing, but the slow march toward recovery continues, despite speed bumps.

house home

house home

Home price growth slowing down

According to the S&P/Case-Shiller report, home prices rose 1.8 percent in July after improving 2.2 percent in June, marking a decelerated pace of improvement. Seasonally adjusted, prices only rose 0.6 percent in July, representing the lowest gain seen in ten months.

Of the 20 major cities tracked by the index, 75 percent saw slower monthly price growth in July. David Blitzer, index committee chairman at S&P Dow Jones Indices has noted that this report reveals the disappointing news that “the rate of increase may have peaked.”

case-shiller

Today, the Federal Housing Finance Agency (FHFA) echoed these findings, reporting that home prices rose a seasonally adjusted 1.0 percent in July, up 8.8 percent from July 2012.

“The Southwest continues to lead the housing recovery. Las Vegas home prices are up 27.5% year-over-year; in California, San Francisco, Los Angeles and San Diego are up 24.8%, 20.8% and 20.4% respectively. However, all remain far below their peak levels,” Blitzer noted.

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The big speed bump

Blitzer indicates that the rising mortgage interest rates beginning in May have led to a decrease in application volume, which he says suggests that that rising interest rates are affecting housing. Additionally, the Federal Reserve last week announced that QE3 bond buying will continue for the time being, but it “may only have a limited, though favorable, impact on housing.”

Looking ahead

“On a monthly basis, Case-Shiller is showing some signs of slowing, even based on months-old data. 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,” said Zillow Chief Economist Dr. Stan Humphries.

“Looking ahead,” Dr. Humphries added, “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.”

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Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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