United States: House prices fall to an 11-month low in July
Home price growth in July continued to follow the downward trend observed over the previous four months. The S&P/Case-Shiller 20-city composite home price index increased a modest 0.3% month-on-month, following June’s revised 0.6% increase (previously reported: +0.5% month-on-month). When adjusted for seasonal factors, house prices grew 0.1% from the previous month in July, undershooting June’s revised 0.2% print (previously reported: +0.1% month-on-month) but in line with market expectations.
In annual terms, home prices softened quite sharply to an 11-month low in July, registering a 5.9% increase, down from 6.4% in June (previously reported: +6.3% year-on-year). As in previous months, housing market weakness in the U.S. Northeast and Midwest drove the deceleration, while price gains in West Coast cities remained far stronger. Las Vegas, Seattle and San Francisco once again logged the largest year-on-year price increases, while New York and Chicago registered marked slowdowns. Overall, 15 out of the 20 cities in the index registered lower annual price increases in July than in June.
House prices are expected to continue rising across the country in the months ahead due to ongoing housing shortages, while the damage caused by Hurricane Florence might also stoke price pressures in East Coast cities. However, headwinds also appear to be quite prevalent notably due to declining housing affordability.
Underlining this point, Nomura economists noted:
“Existing home sales have been slowing recently as lower turnover increasingly constrain sales activity. Recent reports suggest that higher mortgage rates have likely dampened both demand and supply to some degree. Further, home price appreciation, which has been outpacing income growth, appears to be adversely affecting demand for housing while it still remains firm. The University of Michigan consumer surveys, for example, have been indicating that rising prices are increasingly a negative factor for home-buying conditions.”