US house price index rises, stays weaker than expected

The United States housing price index rose during the month of May, though remaining at a level weaker than what markets had expected. The housing sector in the US has witnessed a solid performance over the past few months and the June housing-starts data came in stronger than expected as confidence held firm.

The US Federal Housing Finance Agency (FHFA) house prices index rose 0.2 percent in May from an upwardly-revised 0.3 percent the previous month and was weaker than the expected gain of 0.4 percent, data released by the Office of Federal Housing Enterprise Oversight (OPFHEO) showed Thursday. Prices rose 5.6 percent y/y and remained little changed over the past three months.

In contrast, there was a 1.3 percent decline in prices for the New England Division with prices in the Pacific region also edging lower by 0.1 percent.

There was a 1.2 percent gain in the Mountain region, which also posted the strongest annual increase at 8.5 percent. All divisions reported positive price increases for the year with the weakest reading at 3.4 percent in the Middle Atlantic region.

The path of interest rates shall be closely watched in the short term given that the slide in bond yields following the fallout from Brexit vote pushed US yields down to record lows. This has also had a favorable impact on mortgage rates, which are at historic lows, reports said.

Meanwhile, any fresh movement witnessed in Fed tightening coupled with sharp rise in bond yields is likely to shock the housing sector that could cause chances of mortgage defaults and falling home prices.