United States: After rising to an 18-month high in January, home prices moderate in February
April 26, 2016
The S&P/Case-Shiller 20-city home composite index rose 0.2% in February over the previous month, which came in above the flat reading recorded in January. In fact, February’s print marked the first increase after four months with flat prices. When adjusted for seasonality, the index rose 0.7% in February over the previous month (January: +0.8% month-on-month) and represented the slowest increase since October 2015.
Compared to the same month last year, increases in home prices slowed from 5.7% in January to 5.4% in February, which fell short of the 5.5% rise the markets had expected. The price level registered in January had represented the highest since July 2014. S&P stated that 7 of 20 cities registered higher prices in February. Portland and Seattle continue to be the cities leading the increase, with another month of double-digit growth in prices.
According to S&P, “home prices continue to climb at more than twice the rate of inflation, but the pace is easing off in the most recent numbers.” Moreover, S&P commented that, “mortgage defaults are an important measure of the health of the housing market. Memories of the financial crisis are dominated by rising defaults as much as by falling home prices. Today as well, the mortgage default rate continues to mirror the path of home prices. Currently, the default rate on first mortgages is about three-quarters of one percent, a touch lower than in 2004.”
Author: Ricardo Aceves, Senior Economist