U.S. house prices rise at moderate pace in June, housing activity likely to plateau in 2019

The U.S. house prices rose at a subdued pace in June. The monthly purchase-only price index from the Federal Housing Finance Agency rose 0.2 percent sequentially and 4.8 percent year-on-year after an upwardly revised May figure of 0.2 percent sequentially.

Meanwhile, the 20-city composite from S&P/Case-Shillar saw a sequential rise of just 0.04 percent in June after a 0.13 percent rise recorded in May. The monthly rises in both measures were slightly below expectations.

“With today's estimates, house prices are rising at their slowest y/y pace since 2012, when the post-crisis overhang of housing was still weighing on many local markets”, noted Barclays in a research report.

House prices have decelerated steadily since the start of 2018. This slowdown is possibly part of a broader weakening in the housing market that is also impacting measures of activity such as residential construction and home sales.

Housing activity is expected to plateau this year, rather than deteriorate further. This reflects the view that home affordability should rebound for most households, with accelerating wages and tight labor markets underpinning further rebounds in household income that outpace house price gains.

“This improvement should be reinforced by mortgage interest rates, which have declined sharply this year with expectations of Fed easing. However, with a limited supply of new units coming onto the market, supply and demand for housing appears to be finely matched, which reduces the likelihood of a sharp correction in home prices”, added Barclays.