US consumer confidence rebounds
New York, August 28, 2013
US home prices rose in June, extending a multi-month rebound, though the pace of gains cooled, suggesting higher mortgage rates may end up slowing momentum as the year winds down.
Separate data released yesterday showed consumer confidence rebounded in August. Consumers were more optimistic about the future even though their assessment of their current standing fell.
Home prices rose 0.9 per cent on a seasonally adjusted basis, according to the S&P/Case Shiller composite index of 20 metropolitan areas. Economists had expected them to match May's one per cent gain.
The data is not likely to alter economists' expectations that the housing recovery will continue, making it a sweet spot for an economy that grew just 1.7 per cent in the second quarter.
But mortgage rates have climbed more than a percentage point since late May, largely on expectations that the Federal Reserve will soon start withdrawing its support for the economy by purchasing fewer bonds. Those monthly bond buys had kept long-term interest rates low.
Analysts said that gains in home prices will continue to slow in the months ahead, particularly since the sharpest rise in rates came in late June and early July, likely after many June contracts were already signed.
"We know housing prices tend to lag. You're going to see mortgage applications fall first and then starts and permits will move. It will take time to show up in prices," said Michael Hanson, US economist at Bank of America Merrill Lynch.
Recent data has already shown a decline in mortgage applications and less demand to refinance existing loans, while a report last week showed sales of new single-family homes fell sharply in July to their lowest level in nine months.
The S&P/Case Shiller index showed prices in all 20 cities rose on a yearly basis, led by a 24.9 per cent surge in Las Vegas. But only in six did they rise at a faster clip than in the previous month, down from 10 in May.
Without seasonal adjustment, prices rose 2.2 per cent in June and on a national average were back at their spring 2004 levels.
Prices remain well below their 2006 peak, which preceded a far-reaching collapse that helped plunge the US economy into its deepest recession since the 1930s. Compared with last June, prices rose a healthy 12.1 per cent, just shy of the previous month's 12.2 per cent gain.-Reuters