House Prices Continue to Rise


Nationally, house prices continued to rise in the second quarter of 2013. According to the most recent release by the Federal Housing Finance Agency, U.S. house prices rose by 2.1 percent on a quarter-over-quarter seasonally adjusted basis. This is the eighth consecutive quarterly increase for the House Price Index – Purchase Only. Over the past two years house prices have climbed by 8.1 percent.

On a month-over-month basis, the June increase in house prices were geographically widespread, increasing in every division of the country. As Chart 1 illustrates, the largest gains took place in the Pacific and Mountain divisions, regions of the country containing states, like Nevada and California, which experienced the largest price declines.

Chart 2 updates analysis discussed in an earlier post comparing national house prices, which began a sustained recovery in 2011, with mortgage applications for purchase, a measure of mortgage demand. This relationship is of particular interest because of the recent spike in mortgage rates. Higher mortgage rates could dampen housing demand and restrain house price growth.

According to data released by the Mortgage Bankers Association, mortgage applications for home purchase increased by 0.7 percent over the month of June, but declined by 6.6% over the month of July. Since reaching its most recent peak in April, mortgage applications for purchase have fallen by 7.8 percent, possibly reflecting the 92 basis point increase in mortgage rates that took place over this same period.

As a result of the decline in mortgage applications, the 6-month moving average, which has been rising in tandem with house prices, dipped slightly in July. The 6-month moving average smoothes volatility in the month-to-month data. Holding constant all other influences, the recent decline in mortgage applications that likely stemmed from rising interest rates suggests that house price growth could decelerate in the coming months.

However, other dynamics, such as pent-up housing demand and tight housing supply are expected to support house price growth. In addition, the rise of all-cash sales has diminished the role of mortgage applications for purchase as an indicator of housing demand. As a result, rising house prices and the housing recovery will continue. Nevertheless, mortgage applications for purchase, a key method of purchasing a home, will continue to be watched for clues about the direction of house prices.

To view this original post on the NAHB blog, Eye on Housing, click here.

FineHomesBrokers.com

Reprinted with permission from RISMedia. ©2013. All rights reserved.

About FineHomesDigest

The Fine Homes Team, Mark Finchem, Associate Broker with Long Realty Company, provides service to buyers, seller and builders where fine homes are concerned. With extensive experience in residential real estate transactions we can help you with the home you'd rather have.
This entry was posted in Fine Homes. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s