US economy updates
Join myFT Daily Digest to be the first to know about US economy news.
The rise in US house prices again broke a record in June as buyers compete for a limited supply of homes.
The S&P CoreLogic Case-Shiller national house price index rose 18.6 percent from June 2020. It was the largest annual price growth in more than 30 years of data, and the third consecutive month with record profits.
The U.S. housing market rose last year when Americans borrowed at low mortgage rates to buy spacious, suburban homes while working remotely during the pandemic. Strong demand, coupled with tight inventory, rising wood costs and labor and material shortages, is combining house prices to new highs.
US policymakers have fine-tuned the trend, with the Federal Reserve’s purchases supporting mortgage lending receiving particular attention, as some claim the central bank’s policy fueled the rally and increased the cost of housing.
Fed Chairman Jay Powell has previously pushed back against the idea that asset purchases have benefited the housing market excessively. Last week he delivered his strongest signal yet that the Fed can reverse its pandemic stimulus program this year.
While Wood Markets Weakened – Doug Yearley, CEO of home builder Toll Brothers, recently told CNBC that softer prices would save $ 40,000 per house – other factors make housing increasingly less affordable.
The National Association of Realtors’ housing affordability index fell to its lowest level since November 2018 in June, when mortgage rates were around 200 basis points higher, Oxford Economics economist Nancy Vanden Houten noted.
“The shortage of homes for sale at lower price points was particularly sharp, as many homes were snapped up by investors and converted into rental properties,” said Vanden Houten.
S & P’s index of 20 leading U.S. cities rose 19.1 percent year-on-year, exceeding expectations of an 18.5 percent rise, according to economists polled by Reuters. Phoenix, San Diego and Seattle achieved the highest profits, with each city recording price increases of at least a quarter from June 2020.
More recent data suggests that high prices and limited inventory have taken momentum out of the housing market.
Higher construction costs and increased house prices sent home builder trust to the lowest level in more than a year in August. A forward-looking indication of home sales, the US pending home sales index, fell for the second consecutive month in July.
US consumers signify that their spending intentions for homes and large appliances have declined amid concerns about the spread of the Delta coronavirus variant and inflation.