FHFA: Home price gains lose steam in April
Price softness shows weakness of housing economy
Home prices were unchanged in April, following a gain of 0.7% the prior month, according to the Federal Housing Finance Administration.
Expectations were for 0.5%.
The sharp slowdown in house price inflation in April is unlikely to be a one-off. House price gains will slow further now that housing supply conditions are loosening.
By Census region, prices were divided in the latest month with five of nine Census regions showing price increases in April and four declining.
Advances were led by the East South Central region, up 0.6%. The largest decline was 0.8% for the West South Central. The year-on-year rate for April came in at 5.9%, following 6.4% in March.
Also Tuesday, the Case-Shiller price index was sluggish and below expectations.
These two price measures lag many sales numbers such as yesterday's existing home sales. But price softness raises questions about the strength of the housing economy.
At the same time, new home sales surged, up 18.6% to a 504,000 annual rate, surpassing expectations, the Census Bureau reported.
The western region was the big driver of the gains, from 97,000 to 130,000, the largest increase since February 2013.
The single-month surge in sales will make for exuberant headlines today, but the single-month gain brings the new home sales rate to about two-thirds below the pre-housing crisis rate of 1.38 million.
According to the most recent S&P/Case-Shiller Home Price Indices report, 19 of the 20 cities witnessed lower annual gains in April than in March, with California seeing its returns worsen by approximately three percentage points.
“Although home prices rose in April, the annual gains weakened,” says David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “Overall, prices are rising month-to-month but at a slower rate. Last year some Sunbelt cities were seeing year-over-year numbers close to 30%, now all are below 20%: Las Vegas (18.8%), Los Angeles (14.0%), Phoenix (9.8%), San Diego (15.3%) and San Francisco (18.2%). Other cities around the nation are also experiencing slower price increases.
Mortgage rates are lower than a year ago, and the Federal Reserve is expected to keep interest rates steady until mid-2015 and the labor market is improving.
Case-Shiller notes that housing is not back to normal: prices are being supported by cash sales, low inventories and declining foreclosure and REO sales.
First-time homebuyers are not back in force and qualifying for a mortgage remains challenging.