Home Price Increases Ease

U.S. residential real estate prices are still on the rise, but the latest data show that momentum is easing in the market. The LPS Home Price Index increased …

U.S. residential real estate prices are still on the rise, but the latest data show that momentum is easing in the market. The LPS Home Price Index increased only 0.6% and the report shows that gains in all large metro areas have begun to cool. The LPS Index is released a day ahead of the more popular S&P Case-Shiller Index, although it is often considered a forecast of that report. Overall home prices are still up significantly over a year ago, however, and experts are confident that the recent rise in mortgage interest rates will not have a long-term negative impact on prices or buying. For more on this continue reading the following article from TheStreet.

Home price appreciation slowed in July, according to Lender Processing Services, the latest sign that the housing recovery is losing steam.

The LPS Home Price Index rose just 0.6% in July from June, though prices are still up 8.7% year over year.

All of the five largest states and metropolitan areas saw price appreciation moderate. In California and Los Angeles, gains slowed to 0.5% and 0.3%, respectively, in July from 1.6% and 1.2% in June.

While all states managed to either record gains in home values or stay flat, some metros saw a slight dip in home prices, including Lancaster, York and Harrisburg in Pennsylvania, Ocean City, N.J., Winston, N.C., and Akron, Ohio.

The LPS Home Price Index is a repeat-sales analysis of home prices that represents the price of non-distressed sales by taking into account the discounts of foreclosures and short sales. It is based off closings in July.

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It comes a day ahead of the widely followed S&P Case-Shiller Index, which is based off a three-month moving average and doesn’t consider the impact of distressed sales.

Home prices are sharply off their bottom, and nationwide prices are just under 15% off the June 2006 peak, according to LPS.

Higher interest rates and the rapid appreciation in home values has, however, dented affordability for many borrowers and homebuilders and brokers report that buyers have shown hesitancy in recent transactions.

Most economists, however, hold the view that the rise in interest rates will not derail the housing recovery, so long as the economy continues to add more jobs. That’s because there is considerable pent-up demand, a shortage of inventory and interest rates are still historically low.

Trulia chief economist Jed Kolko noted that it is still cheaper to buy than to rent nationally, though in some cities, especially in California, that trend could soon reverse.

A separate report from Zillow showed home prices continued to gain in August, up 0.4% from July and up 6.6% year over year.

Still, for the third month in a row, home values rose more slowly than the previous month.

"August marked the end of one of the hottest summer home shopping seasons in years, as home value appreciation rates continued their rocket ride upward — perhaps dangerously so in some metro areas," said Zillow chief economist Stan Humphries. "Double-digit appreciation rates do help to lift homeowners out of negative equity and to entice sellers into a low-inventory environment, but this rapid growth is not normal and cannot and should not be expected to last. We are already beginning to see moderation in the monthly pace of home value appreciation, which will be good for the market overall and in the long term."

Zillow expects home prices to rise another 5.2% in the year from August 2013 to August 2014.

This article was republished with permission from TheStreet.

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