U.S. home prices rise at moderate pace in September, housing likely to plateau at current levels in 2019

U.S. home price appreciation momentum eases again in September. According to the S&P/Case Shiller and FHFA surveys, home prices rose at a moderate pace. In the S&P survey, prices were up 0.3 percent sequentially, rebounding slightly compared with its recent prints. This might hint at some stabilization in the annual rate of appreciation after it fell steadily throughout this year, from a high of 6.8 percent in March to 5.2 percent currently. Prices were up in all metropolitan areas except two and imply widespread support for the pickup in the rate of home price appreciation.

The FHFA survey showed that home prices rose 0.2 percent sequentially and 6 percent year-on-year in September. The monthly rise here was also widespread, with prices rising in seven out of nine major regions. Meanwhile, the annual pace of appreciation has decelerated significantly, from a high of 7.7 percent in February to its current 6 percent.

Both the surveys are viewed in line with a stable home price appreciation, although momentum has decelerated, noted Barclays in a research report. Slower home price inflation is part of a wider weakening in the housing market that is clear in housing starts and sales data as well.

“In all, we think that worsening home affordability, rising mortgage rates, and falling home inventory are all working to restrict housing activity this year and represent headwinds for the housing outlook for next year. Our baseline scenario is for housing to plateau at current levels throughout 2019, rather than a sharp deterioration”, stated Barclays.

This reflects the view that even if home affordability might fall further as the Fed continues to increase interest rates in 2019, this should be countered by gradually rising wages and a continued pickup in employment, which both underpin household incomes.

“In addition, we view the balance between demand and supply of housing as finely matched, which should prevent a sharp correction in home prices”, added Barclays.

At 17:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 159.1. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex