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Case-Shiller: US Housing Recovery Slows

Cinthia Murphy

The U.S. housing market continued to recover in June, with an average home in the U.S. that month worth 12 percent more than a year ago. That said, the ongoing recovery seems to be slowing on the heels of rising rates.

The latest S'P/Case-Shiller Home Price Indices report showed that the 10-City and 20-City composites were each up year-on-year roughly 12 percent in June, and all cities surveyed saw home prices improve in June from their previous-month levels as well as on an annual basis. The national index, comprising all nine census divisions and released only once every quarter, climbed 10.1 percent in the past four quarters, according to the latest report.

That's to say that home values across the country have now rebounded some 19 percent from March 2012 lows, and stand today less than a quarter off their 2006 peak levels after several consecutive months of improvement. But June data also showed that the pace of improvement is moderating, and that moderation is most likely due to rising mortgage rates.

As the Federal Reserve gets ready to begin tapering its massive bond-buying program that has kept rates at historically low levels for almost five years, rates are likely to go higher. That's important because the housing market is front and center in the overall U.S. economic recovery from the credit-driven 2008 crisis that pushed the country into a recession.

"National home prices rose more than 10 percent annually in each of the last two quarters," David Blitzer, chairman of Index Committee at S'P Dow Jones, said. "However, the monthly city by city data show the pace of price increases is moderating."

"As we are in the middle of a seasonal buying period, we should expect to see the most gains," Blitzer said. "With interest rates rising to almost 4.6 percent, home buyers may be discouraged and sharp increases may be dampened."

Blitzer also noted in the report that other housing data are positive, even if not as "robust" as they were last spring.

"Starts and sales of new homes continue to lag the stronger pace set by existing homes," Blitzer said. "Despite recent increases in mortgage interest rates, affordability is still good as credit qualifications have eased somewhat."

Both the iShares U.S. Home Construction ETF (ITB) and the SPDR S'P Homebuilders ETF (XHB) were each bleeding about 1 percent of their value in early trade following the report.





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