By Rom Badilla, CFA
The recovery in the housing market continues as home prices rose in July. Standard & Poor/Case-Shiller released its Home Price indices today. The 20 city composite, which measures home values in the largest metropolitan markets in the U.S., increased 0.44% in July on a seasonally adjusted basis.
This gain brings the year over year tally to 1.20% which is above consensus surveys as economists expected an increase of just 1.05%. The better than expected number follows a June reading of 0.59% which was revised upward from initial readings by 0.50%. The home price index value now stands at 144.61.
This latest report on home prices reveals more signs that the market continues to find traction on the road to recovery. This is the first time in three years where the index has posted six consecutive monthly gains.
The gain in the headline number was supported by increases across most major cities. 18 of the 20 cities posted appreciated in July. Phoenix jumped 1.43% that month while Detroit and Atlanta gained 1.37% and 1.08%, respectively. San Francisco home prices improved by 0.87% and Chicago followed by appreciating 0.83%
Both Denver and Boston saw acceleration as price gains exceeded the previous month. Denver saw home prices gain 0.77% in July after a 0.40% increase in June. Boston’s home prices improved from 0.56 in June to 0.70%.
New York and Cleveland were the only two cities not to see positive gains in July. New York was flat on the month after increasing 0.60% in June while Cleveland home prices fell by 0.39% after edging higher by 0.26 in June.
As we have seen in the past, gains on the housing front coupled with rising equity markets, can rejuvenate consumer spending via the wealth effect. In other words, as people can see their assets improve in value, the more secure they become in their financial well-being. This confidence and feeling of being richer, whether real or not, can translate into spending and add to economic growth. As a result, today’s data release on home prices remains the lone positive surrounded by an economy that is mired by lackluster growth and stagnant labor markets.
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