More good news on the housing market, despite the rise in mortgage rates. The latest S&P/Case-Shiller home price index gained 12.4% in July vs. a year ago--its strongest showing since early 2006. But on a month-to-month-basis, prices rose at a slower pace--1.8% in the 20-city composite of the index compared to 2.2% in June.
"Overall the housing market is steadily gaining but it does have several headwinds--higher mortgage rates and very tight inventory," says Diana Olick, real estate correspondent at CNBC. Thirty-year fixed mortgage rates are now at 4.5%, up from 3.7% a year ago.
While home prices are rising--along with the stock prices of homebuilders--Olick tells The Daily Ticker they haven't moved high enough for some sellers who are still underwater (homeowners who owe more on their mortgages than their houses are worth).
Despite the headwinds, she says the future looks bright for housing--especially for homebuilders--but ultimately what happens in housing reflects what happens in the job market.
"We've seen first-time buyers fall out of this market," says Olick. "They are usually 40% of homebuyers. Now they are less than 30%. That's because of job growth and income growth. Once we see those jobs come back the demand for new homes will come back as well."
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