Investors were faced with a glass half-full or half-empty conundrum following the latest batch of data on the US housing market that showed a continued moderation in home prices, but signs of returning buyers and early-stage construction approval.
Tuesday’s data points, ranging from an index of home prices and building permits to earnings from one of the country’s largest homebuilders, come against a backdrop of growing concern about the outlook for the US economy and debate about whether and when the Federal Reserve might begin to cut interest rates.
House prices in across 20 major US cities rose 2.5 per cent year-on-year in April, according to the Standard & Poor’s CoreLogic Case-Shiller national home price index. That was down from a rise of 2.6 per cent in March, which was revised down from 2.7 per cent, and a touch lower than the 2.6 per cent economists had forecast.
Bright spots were Las Vegas, Phoenix and Tampa, which all saw year-on-year price gains of between 5.6 per cent and 7.1 per cent.
“Home price gains continued in a trend of broad-based moderation” Philip Murphy at S&P Dow Jones Indices said in an accompanying statement.
Rising mortgage rates in the first quarter of 2018 contributed to a drop-off in the housing market last year. Even though mortgage rates have since reversed course, with the 30-year fixed mortgage rate below 4 per cent, “the [year-on-year] house price moderation that coincided with the 2018 uptick in rates has not changed course”.
Other industry statistics backed up that observation, Mr Murphy said, pointing to rising national supply of housing that suggests weaker demand and a current potential trend that is seeing price increases normalise around their real long-run averages.
Some players in the market are more upbeat about the moderation in house prices. Lennar, one of the US’s three biggest homebuilders, reported quarterly results on Tuesday that topped Wall Street estimates, and said affordability was a key factor drawing buyers back to the market.
Stuart Miller, chairman, said the company “benefited from both first quarter deliveries postponed by weather as well as a recovering housing market” adding that moderation of home price growth in the second half of last year and lower mortgage rates “stimulated both affordability and demand, leading homebuyers back to the market.”
Lennar reported a 2 per cent year-on-year rise in revenue to $5.6bn in the three months ended May 31, which zipped past the median forecast of $5.1bn in a survey by Refinitiv. Net earnings of $1.30 a diluted share were 38 per cent higher than a year ago and ahead of Wall Street forecasts for $1.14 a share.
At the more encouraging end of housing market data this morning, the number of building permits rose by 5,000 to 1.299m in May, according to data from the Census Bureau. The 0.7 per cent month-on-month increase was the quickest pace since November.
New home sales data are due at 10am New York time on Tuesday.
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