US house price growth slows further in August
The US housing market lost further momentum in August, as house price growth fell below 6% for the first time in a year.
According to the S&P CoreLogic Case-Shiller National Home Price Index, nationally prices rose 5.8% in August, down from the 6% year-on-year increase reported in July.
The 10-City Composite saw an annual increase of 5.1%, down from 5.5% in July, and the 20-City a 5.5% gain, which was lower than July’s 5.9% growth.
America’s housing market is adjusting to low inventories and rising building costs, as well as an increase in the cost of borrowing. The Federal Reserve has upped interest rates eight times since 2015, to the current range of 2%-2.25%, and most economists have the next rise pencilled in for as soon as December 2018.
David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said: “Following reports that home sales are flat to down, price gains are beginning to moderate. Comparing prices to their levels a year earlier, 14 of the 20 cities [covered] show slower price growth.
“Other housing data tell a similar story: prices and sales of new single family homes are weakening, housing starts are mixed and residential fixed investment is down in the last three quarters. Rising prices may be pricing some potential home buyers out of the market, especially when combined with mortgage rates approaching 5% for 30-year fixed rate loans.”
However, Blitzer stressed there were currently “no signs” that the current weakness would become a crisis.
“The mortgage default rates reported by the S&P/Experian Consumer Credit Default Indices are stable. Without a collapse in housing finance like the one seen 12 years ago, a crash in home prices is unlikely.”
Analysts instead expect house price growth to continue, but at lower levels of around 3% to 4% annually.
Matthew Pointon at Capital Economics was of a somewhat similar view, telling clients that the chance of a "more severe" house price correction was "also low", especially given tight supply.
For the market as a whole, at the current pace of sales, the inventory of homes remained at just 4.4 months.
"That's significantly below its long-run average, and based on past form that implies a house price crash is unlikely. We expect prices to slow to 5% by the end of this year, and 2% in 2019."