Housing prices in the key spring summer season appear to be going sideways, which is quit disappointing, as interest rates and refinance mortgage rates have dropped where mortgages are at their lowest point in 20 months. The cost of financing a home often exceeds, over the life of a house, the cost of the home itself. With interest rates dropping, it should be a benefit to the housing market, but this could be an indication that many investors think housing prices have peaked. Even with the added incentive of lower monthly payments, it’s still not enough for seasoned investors to step up.
This was the 13th straight month in which annual home growth rate slowed, and the lowest pace of annual price gains since August 2012, according to Case-Shiller. The only market that appears to be growing is entry level homes for first time buyers. The increase in mortgage rates in the first part of 2018 contributed to the peaking/drop-off in growth of the housing market last year. Even though mortgage rates have since reversed course, with the 30-year fixed mortgage rate now below 4%, “the house price moderation that coincided with the 2018 uptick in rates has not changed course” says Philip Murphy, managing director and global head of index governance at S&P Dow Jones Indices.
House prices across 20 major US cities rose 2.5% 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% in March, which was revised down from 2.7%, and a touch lower than the 2.6% economists had forecast. There are signs that the housing market is coming back but only in the pockets of warming weather.
The number of new home sales fell to a five-month low of 626,000 in May. That was down from an upwardly revised 679,000 (previously 673,000) in April and below economists’ forecast for 680,000. The 7.8% month-on-month drop was the steepest since December.
A old investment theory of investment says numbers don’t go up on good news, meaning the higher prices are already baked in. Look out for bad news.