The S&P/Case-Shiller and the Federal Housing Finance Agency (FHFA) released their home price indices for July 2018. National home prices rose at the slowest annual growth rate since June 2014. Moreover, seven metro areas experienced home price declines in July.
The Case-Shiller U.S. National Home Price Index, reported by S&P Dow Jones Indices, rose at a seasonally adjusted annual growth rate of 1.9% in July. It was the lowest seasonally adjusted annual growth rate since June 2014. The Home Price Index, released by the Federal Housing Finance Agency (FHFA), rose at a seasonally adjusted annual rate of 2.7% in April, slower than the 3.7% increase in June, confirming the deceleration in home prices for this month.
Figure 2 shows the annual growth rate of home prices for 20 major U.S. metropolitan areas.
Among the 20 metro areas, Las Vegas, San Francisco and Cleveland had the highest home price appreciation. Las Vegas led the way with 14.6%, followed by San Francisco with 11.4% and Cleveland with a 9.3% increase. Eleven out of the 20 metro areas had higher home price appreciation than the national level of 1.9%. In July, thirteen metro areas had positive home price appreciation while seven metro areas had negative home price appreciation, including San Diego (-0.2%), Detroit (-0.2%), Los Angeles (-0.5%), Dallas (-1.6%), Chicago (-1.8%), Boston (-2.4%) and New York (-5.5%).
Freddie Mac (OTCQB: FMCC) released today its monthly Outlook for September showing that housing remains a bright spot for the U.S. economy. Mortgage originations are expected to surge in the third quarter, and our forecast for the best year in home sales since 2006 looks increasingly on the mark.
Expecting the 30-year fixed rate mortgage to average 3.6 percent in 2016, the lowest annual average in over 40 years. The current record low annual average occurred in 2012 at 3.66 percent.
Showing that falling mortgage rates from 4 percent at the end of 2015 to about 3.5 percent in the third quarter of 2016 have more than offset the rise in house prices in most markets, helping to preserve homebuyer affordability.
Revising up our forecast of home price appreciation to 5.6 percent and 4.7 percent in 2016 and 2017, respectively. This is up from last month’s forecast of 5.3 percent for 2016 and 4.0 percent for 2017.
Showing cash-out refinance activity on the rise in the second quarter, with an estimated $13.3 billion net dollars of home equity converted to cash during refinancing. This is up from $11.4 billion in the first quarter of 2016 but substantially less than the peak cash-out refinance volume of $84.0 billion during the second quarter of 2006.
Remaining on track for mortgage originations to reach $2 trillion in 2016, the highest total since 2012.
Quote: Attributed to Sean Becketti, Chief Economist, Freddie Mac.
“The housing market remains a bright spot for the U.S. economy, with solid job gains and low mortgage interest rates sustaining the economy’s momentum in September. In most markets, low mortgage rates have more than offset the rise in house prices, preserving homebuyer affordability for the typical household. Homeowners are also taking advantage of low rates and house price appreciation that is increasing their home equity. The share of cash-out refinances grew to 41 percent in the second quarter of 2016, compared to 38 percent in the first quarter and 15 to 20 percent during the housing crisis.”
“Mortgage originations are expected to surge in the third quarter, reflecting the impact of Brexit in recent mortgage activity. We continue to believe that originations will reach $2 trillion this year, the highest since 2012.”
House sales and prices are rising. Home sales in June were 5.57 million at annual rates, the highest since February 2007 when national home prices peaked. Currently prices as measured by the S&P/Case-Shiller National Home Price Index are climbing at a 5% annual rate and are a mere 3% from their all-time peak.
What next? The next S&P/Case-Shiller Home Price Index report will be released on Tuesday morning at 9 AM – check to see if the advance continues. The data will be posted atwww.spdji.com.