US home prices rise at slowest pace in 10 months

US consumer confidence approaches all-time high

WASHINGTON, Sept 25, (Agencies): US home prices rose in July at the slowest pace in 10 months as climbing mortgage rates become a more significant factor for a growing number of prospective buyers.

The S&P CoreLogic Case-Shiller 20-city home price index increased 5.9 percent in July compared with a year earlier, down from a 6.4 percent annual gain the previous month.

Home prices are rising at twice the rate of wages, which has likely contributed to a cooling in the market this year. Sales of existing homes have dropped 1.5 percent in the past 12 months. Mortgage rates last week reached their highest level since May.

“Coupled with mortgage rate increases, higher prices are stifling home sales as more buyers are priced out of the market,” Danielle Hale, chief economist at Realtor.com, said Tuesday after the report was released.

Las Vegas, Seattle and San Francisco reported the biggest annual gains, with all three cities seeing double-digit increases. Yet in 15 of 20 cities, price gains were smaller in July than in the same month a year earlier.

The combination of rising home prices and higher mortgage rates has made homes less affordable, even as a strong job market and some signs of higher pay have lifted demand.

The average 30-year mortgage rate rose to 4.65 percent last week, according to mortgage giant Freddie Mac. That is up from 3.83 percent a year ago.

Any rate below 5 percent is very low by historical standards, but many homeowners locked in rates below 4 percent in the past five years. That means they would have to accept a higher rate to buy a new home. Plenty of homeowners are choosing to remodel their current homes instead.

Home prices in 12 of the 20 cities in the Case-Shiller index have rebounded from the housing slump and have reached new heights. Four of the cities that are still below their housing bubble peaks are seeing strong price gains: Las Vegas, Miami, Phoenix and Tampa. The other four are seeing modest increases: Washington, D.C., Chicago, New York and Atlanta.

Limited

The number of homes for sale remains limited, which has sparked bidding wars in many cities. However, the supply crunch may be easing: There were 1.92 million homes for sale at the end of August, up from just 1.87 million a year ago.

Confidence among American consumers in September rose unexpectedly for the second month in a row, hovering near an 18-year high, according to a survey released Tuesday.

The survey showed a sharp gain in optimism among consumers, with respondents apparently shrugging off worries about inflation and a trade war with China, and point to continued healthy spending boosting the economy.

The consumer confidence index rose nearly four points to 138.4, with views about current conditions rising modestly but with a six-point surge in expectations to 115.3, according to the Conference Board’s monthly report.

Forecasts had called for a modest decline in the closely-watched reading of consumer sentiment.

“The September reading is not far from the all-time high of 144.7 reached in 2000,” Lynn Franco, the Conference Board’s director of economic indicators, said in a statement.

“Consumers’ assessment of current conditions remains extremely favorable, bolstered by a strong economy and robust job growth.”

The bump in expectations points to economic growth of higher than three percent in the remainder of 2018, Franco said.

“These historically high confidence levels should continue to support healthy consumer spending, and should be welcome news for retailers as they begin gearing up for the holiday season,” she said.

The cutoff for the survey was September 14, meaning it would not have captured any reaction to US President Donald Trump’s latest move to slap tariff on a whopping $200 billion in additional Chinese imports, almost undoubtedly increasing consumer costs.

But so far confidence measures have appeared undisturbed by trade tensions.

The consumer outlook about the next six months were upbeat, with a growing share of respondents expecting conditions to improve and jobs to become more plentiful.

There was, however, a marginal decrease in the share of people expecting their incomes to increase in the short term.