US housing recovery firms

A swath of US housing data last night showed encouraging signs for its ongoing recovery. The Case Shiller house price index for released for April and showed, as expected, slowing price gains (all charts courtesy of Calculated Risk):

Data through April 2014, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices … show that the 10-City and 20-City Composites posted annual gains of 10.8%. This is a significantly lower rate when compared to last month. Nineteen of the 20 cities saw lower annual gains in April than in March.

The 10-City and 20-City Composites increased 1.0% and 1.1% in April. Seven cities – Cleveland, Las Vegas, Los Angeles, Miami, Phoenix, San Diego and San Francisco – reported lower returns than in March. 

“Although home prices rose in April, the annual gains weakened,” says David M. 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.”

Prices are still slowing from the impact of spiking mortgage rates last year:

You’ll note, however, that new borrowers are now enjoying the equivalent of one rate cut. This is one of the Fed’s successes in talking down bond rates even as it tapers. I don’t expect rates to fall much further and do reckon house prices will slow much more in the year ahead but that’s will be all right so long as they stabilise, which seems a fair bet.

What matters more is whether the new housing recovery continues. I’ve been concerned that easing gains in house prices would dent the new home market but May data released last night was strong:

Sales of new single-family houses in May 2014 were at a seasonally adjusted annual rate of 504,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 18.6 percent above the revised April rate of 425,000 and is 16.9 percent above the May 2013 estimate of 431,000.

…”The seasonally adjusted estimate of new houses for sale at the end of May was 189,000. This represents a supply of 4.5 months at the current sales rate.”

That’s a nice jump. Levels remain low but are crawling higher. Here are the charts:

So long as sales and starts keep firming then price can keep easing without hurting growth.