The Case-Shiller S&P Index report released today shows that home prices have sunk to their lowest since January 2017, with rising interest rates impacting housing demand.
Key Takeaways
- Home values continue to rise, but their gains have shrunk with mortgage rates making purchase unaffordable for many Americans.
- Prices were up 5.5% annually in September but down 5.7% monthly from the August reading according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index.
- On average, 30-year fixed mortgage interest rates are a full percentage point higher than this time last year with a 10-year low in affordability.
- Annual gains are down for the second consecutive month.
The 10-City Composite annual increase is down 5.2% from the previous month and up 4.8% annually while the 20-City composite registered a 5.1% year-over-year increase, down 5.5% the previous month.
The biggest gains are currently being seen in cities which saw the biggest price drops from the 2008 housing collapse with Las Vegas, Phoenix, and Tampa among the cities with rising home values.
In September, the cities with the highest year-over-year increases were Las Vegas, Seattle, and San Francisco. Las Vegas saw a 13.5% increase with San Francisco rising 9.9% and Seattle rising 8.4%. Only four cities saw bigger annual increases in September over August.
While affordability of houses is low, this is being offset by higher take-home pay due to tax cuts as well as a strong labor market with more positions than skilled workers to fill them.
Expert Outlook
David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said: "Home prices plus data on house sales and construction confirm the slowdown in housing. One factor contributing to the weaker housing market is the recent increase in mortgage rates."
Blitzer also drew attention to home sales data which peaked in November 2017 and has since weakened.
"Sales of existing homes are down 9.3 percent from that peak. Housing starts are down 8.7 percent from November of last year. The National Association of Home Builders sentiment index dropped seven points to 60, its lowest level in two years.”
Market Reaction
Gold is trading at $1,212.35/oz with a loss of 0.64% on the day with December Comex Futures trading at $1,211.90/oz and a loss of 0.86%.
The housing market decline is, by and large, the only blip in a secure US economy which is overall showing positive performance despite the pressure from international trade conflicts which are a likely factor in international stock market uncertainty.
Gold Price Chart
More articles from Conor Maloney
