Home prices in the U.S. climbed in July as economists anticipated.
The S&P CoreLogic Case-Shiller U.S. National Price Index recorded a 5.9% annual gain, up from 5.8% in June. The national average was 5.1% above the July 2006 peak.
Seattle, Portland, and Las Vegas led the 20-city index which rose to a 5.8% year-over-year increase, up from 5.6% the previous month. Expectations were 5.7%, according to a Bloomberg survey.
“Consumers, through home buying and other spending, are the driving force in the current economic expansion,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, in a statement.
Housing demand remained strong and limited existing home inventory sustained upward price pressures. A healthy labor market also helped prices. Analysts estimated a 5.6%-5.9% annual growth.
“A tighter inventory situation, especially in existing structures, has kept home prices elevated in recent months,” Barclays economist Pooja Sriram said in a research note.
Housing supply, particularly in the south, will also be pressured by Hurricane Harvey and Irma as cities start to rebuild. Total housing inventory at the end of August declined 2.1% to 1.88 million existing homes available for sale, and is now 6.5% lower than a year ago, according to the National Association of Realtors. It has fallen year-over-year for 27 consecutive months. Unsold inventory is at a 4.2-month supply at the current sales pace, which is down from 4.5 months a year ago.
For the second month in a row, Seattle and Portland recorded the highest year-over-year price increases among the 20 major metro cities, with a 13.5% and 7.6% gain, respectively. Las Vegas, one of the hardest hit cities in the housing collapse, saw the third fastest increase with a 7.4% gain.
Despite the uptick in prices, Blitzer warned that the housing market may be slowing down. “Sales of both new and existing homes have slipped since last March,” he said. “The Builders Sentiment Index published by the National Association of Home Builders also leveled off after March.” Additionally, the Fed’s recent decision to shrink its $4.5 billion balance sheet could push mortgage rates upward.
On Tuesday, the Commerce Department said new home sales dropped 3.4% to a seasonally adjusted rate of 560,000 in August from a month earlier — hitting its lowest level in eight months. The results were surprising, economists expected new home sales to rise 3.3% to 588,000, according to a Reuters poll. Sales in August were down 1.2% from a year ago.
However, the agency noted that latest data could have been affected by Hurricanes Harvey and Irma since sales information at the end of August was collected for only 65% of cases in Texas and Florida counties impacted by the storms, compared with 95%.
Amanda Fung is an editor at Yahoo Finance.