July home prices rise but pace is slowing

Home prices rose strongly in July but the rate of increase may have peaked, a widely watched housing index shows.

July home prices were up 12.4% for the 12 months, the S&P Case-Shiller 20-city index shows.

Prices were also up 1.8% from June and, once again, every one of the 20 cities in the index posted gains on a monthly basis.

However, the monthly rates of price gains have declined, the index shows.

"More cities are experiencing slow gains each month than the previous month, suggesting that the rate of increase may have peaked," says David Blitzer, chairman of the index committee at S&P Down Jones Indices.

Case Shiller's seasonally adjusted numbers show July prices up 0.6%, the slowest pace in nine months.

On a seasonally adjusted basis, prices in Miami, for instance, were up 0.5% in July from June but had risen 1.2% in June from May. Portland, Ore., prices were also up 0.5% in July vs. a 1% jump in June from May.

The increase in mortgage rates beginning last May led to fewer applications for mortgages. That suggests that higher rates are affecting housing, he says.

Home price data from Lender Processing Services also shows a slowing of appreciation.

In July, its data shows U.S. home prices up just 0.6% from June with 5 of the largest states and metropolitan areas seeing slower month to month price growth.

For instance, prices in California were up 0.5% in July from June but 1.6% in June from May, LPS says.

A slowing of appreciation is to be expected, says Stan Humphries, chief economist of real estate website Zillow.

Its data, too, shows a moderation in the monthly pace of home value appreciation. That "will be good for the market overall and in the long term," Humphries says, noting that double-digit appreciation can lead to housing bubbles.

The Federal Reserve's decision last week to keep interest rates low -- and not yet slow its purchases of mortgage backed securities -- may have a "limited, though favorable" impact on housing, Blitzer says.

The average rate for a 30-year-fixed rate loan was 4.5% for the week ended Thursday, down slightly from the week before but still up from 3.49% a year ago, Freddie Mac says.

While rates are likely to remain low, some economists still expect them to trend higher in the coming months.

Article curated from USA Today