United States: Home prices soften at the outset of the second quarter
June 26, 2018
Home prices moderated in April from their strong uptrend in the prior month, with the S&P/Case-Shiller 20-city composite home price index increasing 0.8% month-on-month. April’s print followed a 1.0% increase recorded in March, and matched market analysts’ expectations. When adjusted for seasonal factors, house prices grew only 0.2% from the previous month in April, easing from the revised 0.4% uptick logged in March (previously reported: +0.5% month-on-month) and falling short of market expectations of 0.5% growth.
On a year-on-year basis, home prices rose 6.6% in April, easing from the three-and-a-half-year high of 6.8% in March. West Coast cities continued to drive the expansion, with Seattle, Las Vegas and San Francisco posting double-digit price growth. Seattle was the city with the fastest price growth for the 20th consecutive month. Nine of the 20 cities in the index experienced higher price growth in April from the previous month. Similar to last month’s results, Chicago and Washington logged the softest annual increases in prices.
Home prices are expected to continue appreciating over the short term as sales continue to outpace inventory growth. Housing shortages are pushing up prices, particularly in West Coast markets. Moreover, strong economic activity and nascent real wage growth should continue to fuel housing demand. However, higher mortgage rates due to faster monetary policy tightening, alongside more elevated home prices, could rapidly price some buyers out of the market and dampen momentum.
Author: Joffrey Simonet, Economist