U.S. home price inflation remains weak in April, housing likely to plateau at current levels in 2019

U.S. home price inflation continued to be weak in April, showed the S&P CoreLogic Case-Shiller survey. On a year-on-year basis, prices rose 2.5 percent, whereas prices came in flat on a sequential basis. Home price appreciation eased to 2.5 percent from 6.7 percent in March on an annual basis. A range of home price survey is in line with slower momentum in home prices inflation. At a city level, prices dropped in four of the 20 major metropolitan areas. The FHFA survey showed slightly stronger home price inflation at 0.4 percent sequentially, although on an annual basis prices slowed down in this survey as well.

“In our view, this is part of a broader softening in the housing market that is also evident in starts and sales activity.  We think deteriorating home affordability and increasing mortgage interest rates helped to slow the housing market in 2018 and represent headwinds for this year”, noted Barclays in a research report.

Housing is likely to plateau at current levels throughout 2019, rather than deteriorate further. This reflects the view that home affordability should rebound, due to gradually rising wages and the continued pickup in employment that both underpin household incomes. The recent easing in mortgage rates should also act as a tailwind to the housing sector.

“We expect the Fed to cut interest rates by 75bp this year, which should further ease borrowing costs for households. Finally, we view the balance between demand and supply of housing as finely matched, which should prevent a sharper correction in home prices”, added Barclays.

At 16:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -134.875 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex