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United States Housing February 2019

United States: Home price growth remains on a downward trend in February

Home prices rebounded somewhat in February, although annual gains weakened for the eleventh month in a row. On a month-on-month basis, the S&P/Case-Shiller 20-city composite home price index rose 0.2% in February, contrasting January’s 0.3% decline. When adjusted for seasonal factors, house prices grew 0.2% from the previous month, under market expectations and January’s reading, both at 0.3%.

In annual terms, home price growth continued to tumble, from a revised 3.5% in January (previously reported: +3.6% year-on-year), to just 3.0% in February, an over six-year low. 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, 19 out of the 20 cities in the index registered slower annual price growth in February than in January.

Looking ahead, although a more dovish stance from the Fed—which helped significantly lower mortage rates since the beginning of the year—and solid wage gains should support demand, home price pressures will likely remain muted as economic growth cools down and supply shortages—particularly for starter homes—are progressively resolved. Commenting on this outlook, economists at Nomura added:

“Despite steady wage gains and declines borrowing costs in early 2019, buyers likely remained wary of higher home prices which accelerated sharply in 2017 and early 2018. The ongoing slowdown in home price appreciation has been more notable in areas in the West where home affordability had worsened more rapidly. Recent rebounds in new and existing home sales data suggest that the recent slowdown in sales may be stabilizing. However, we remain cautious overall as recent consumer surveys […] indicate that consumers continue to perceive high prices as a negative factor for current buying conditions.”

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