This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Home Prices Continued to Rise in July but at a Slower Rate (Update 1)

Updated from 9:22 a.m. EDT with additional details and commentary.

NEW YORK ( TheStreet) -- Home prices continued to rise in July, though the pace of monthly gains are slowing as buyers feel the impact of rising interest rates.

The S&P/Case-Shiller 20-City Composite Index and 10-City Composite Index rose 1.8% and 1.9%, respectively, from June. On a seasonally adjusted basis, the indices rose by only 0.6% and 0.7%, respectively.

Economists polled by Bloomberg expected the 20-City index to rise 2% from June or 0.8% on a seasonally adjusted basis.

Year over year, the 20-City composite rose 12.4%, which is still a very strong rate.

The Case-Shiller Index is based on July closings and on a three-month moving average. So the price trends capture activity dating back to May, when interest rates were just beginning to rise.

All the 20 cities that make up the widely followed index have seen monthly gains for four months in a row. Still, the pace of gains is decelerating. For instance, the 20-City Index rose by a higher rate of 2.2% or 0.9% seasonally adjusted in June.

"Home prices gains are holding their 12% annual rate of gain established by the two composite indices in April," said David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. But he said that the slowing pace of monthly gains suggest that "the rate of increase may have peaked."

"Home prices in July continued to be buoyed by spring market conditions: strong pent-up demand, historically low mortgage rates, and limited inventory. These price gains are unlikely to last," Ellen Haberle, economist at national real estate brokerage Redfin, said. "We expect that higher mortgage rates, growing inventory levels, and seasonal relaxations of home demand will begin to moderate home price growth in the autumn months."

As of July 2013, average home prices across the United States are back to their spring 2004 levels. Measured from their June/July 2006 peaks, the peak-to-current decline for both composites is approximately 21% to 22%. The recovery from the March 2012 lows is 20.5% and 21.2% for the 10-City and 20-City composites.

The Southwest is leading the recovery, with Las Vegas home prices up 27.5% year over year. Prices in the California cities of San Francisco, Los Angeles and San Diego are up 24.8%, 20.8% and 20.4%, respectively.

Some of these gains are exaggerated, because the share of foreclosures and short sales have declined since last year. Distressed properties typically sell at deep discounts to market prices.

Robert Shiller, the Yale University economics professor who helped create the S&P Case-Shiller Index, said the pricing data has been mixed. Some states continue to see prices skyrocket, which Shiller said makes him worry about a bubble in those areas.

The moderating pace of monthly gains, however, reduces the chance of a bubble. Shiller seems unsure where prices are headed.

"This might be the beginning of a slowdown or the beginning of a bubble," he told CNBC Tuesday morning.

-- Written by Shanthi Bharatwaj New York.

>Contact by Email.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DIA $160.32 -0.02%
IYR $67.02 -1.50%
XHB $28.52 0.90%
SPY $185.45 0.02%
AAPL $95.01 0.00%


Chart of I:DJI
DOW 16,014.38 -12.67 -0.08%
S&P 500 1,852.21 -1.23 -0.07%
NASDAQ 4,268.7630 -14.99 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs