United States: Annual home price growth continues to weaken despite strong monthly gains in March
Home prices posted strong gains in March, further extending the rebound observed in February after several months of price decline. On a month-on-month basis, the S&P/Case-Shiller 20-city composite home price index rose 0.7% in March, up from 0.2% in February. When adjusted for seasonal factors, however, house prices only grew 0.1% from the previous month, under February’s 0.3% and market expectations of 0.2%.
Despite the solid month-on-month increase, home price growth continued to slow in annual terms, from 3.0% in February to a six-and-a-half-year low of 2.7% in March, overshooting analysts’ expectations of 2.5%. Las Vegas, Phoenix and Tampa registered the largest year-on-year price increases, while momentum was weakest in California’s San Francisco, Los Angeles and San Diego. Overall, 16 out of the 20 cities in the index registered slower annual price growth in March than in February.
Commenting on the reading, David Blitzer, managing director at S&P Dow Jones Indices, noted:
“Given the broader economic picture, housing should be doing better. Mortgage rates are at 4% for a 30-year fixed rate loan, unemployment is close to a 50-year low, low inflation and moderate increases in real incomes would be expected to support a strong housing market. Measures of household debt service do not reveal any problems and consumer sentiment surveys are upbeat. The difficulty facing housing may be too-high price increases. At the currently lower pace of home price increases, prices are rising almost twice as fast as inflation.”