U.S. house price appreciation eases in May

U.S. house price appreciation eased in the month of May. The 20-city composition from S&P/Case-Shiller CL saw a seasonally adjusted change of 0.04 percent sequentially. On a year-on-year basis, it rose 3.7 percent. Meanwhile, the data for April was downwardly revised. The housing price appreciation trend appears to have softened somewhat in May.

Recent housing activity reports imply a recovery effect throughout starts and sales since May as they benefited by lifting of the lock-down measures.

“We believe two other factors have benefited the housing sector so far: 1) monetary policy (through lower interest rates) and 2) fiscal policy (through government transfers to households). In addition, a desire from households to move to suburban areas with more space and more flexible working arrangements for the time being may be further supporting housing activity”, said Barclays in a research report.

Within this backdrop, home price appreciation might decelerate a bit more in the months ahead if the lagged effect from the activity shock continues, but the general backdrop is believed to be supportive and a sharp deterioration in prices is not expected. However, should there be a permanent shift in preferences for living in the suburbs and away from big cities, it would represent considerably more downside risks from  the S&P 20 City Index compared to measures that focus on nationwide prices given the former’s focus on large metropolitan areas, said Barclays.