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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Home Prices Soften, But That's Not Enough To Boost Housing Market

NEW YORK (MainStreet) New housing data shows the sharp rise in home prices may be starting to slow down.

The S&P/Case-Shiller Home Price Index, which measures home prices of 20 metropolitan cities, rose 1.15% in April, but is up 10.8% year-over-year. In March, the index was up 12.4% year-over-year. The index is about 19% below its summer 2006 peak, indicating just how inflated prices were pre-crisis.

The slowdown in the rise in home prices could be a boon to potential buyers, who have been sitting on the sidelines, discouraged by prices outside of their budgets. This, along with falling mortgage rates, may also bring more buyers to the current seller's market.

Mortgage rates have been on the decline, despite the Federal Reserve's continued scale back of its bond stimulus, which has kept interest rates low for years. Freddie Mac says the average rate on a 30-year fixed mortgage stand at 4.17%, compared to 4.20% from the week earlier and 3.93% from the same time last year. A year ago at this time was when the Fed hinted at tapering its stimulus, which pushed interest rates up. The tapering began in 2014 with a $10 billion monthly reduction in asset purchases.

But analysts don't think that's enough to boost the housing market.

"The biggest barrier for people buying homes is qualifying for a mortgage and the lack of supply of existing and new homes," says David Blitzer, chairman of the index committee at S&P Dow Jones Indices.

The National Association of Realtors said total housing supply stands at 2.28 million existing homes for sale, equating to a 5.6 month supply. "That's a low number," Blitzer says. "People are having trouble finding homes they want to buy."

ITG chief economist Steve Blitz says home prices and interest rates aren't powerful enough forces to cause growth in the housing market to lift the overall economy. "Demand will be impacted by these factors, but lifting the trend line higher will take improvement in income and employment," Blitz says.

Blitz points to the importance of wage growth for those ages 25 to 34. "Until we do, we'll be traveling along a lower trend line where movements along that line are determined by price and interest rates," he said.

Investors were reminded to not take economic growth for granted, as a disappointing report on Wednesday from the Commerce Department's Bureau of Economic Analysis revised the first quarter GDP contraction of 2014 to 2.9%, compared to the previously reported 1%. The harsh winter was the root of the contraction, which stifled economic growth more than analysts expected.

- Written by Scott Gamm for MainStreet. Gamm is author of MORE MONEY, PLEASE.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,965.29 +45.70 0.27%
S&P 500 1,984.40 +2.80 0.14%
NASDAQ 4,528.1310 +0.6170 0.01%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs