[WASHINGTON] Home prices in 20 US cities rose at a slower pace than projected in April, indicating the market was experiencing uneven gains as it entered the busier selling season.
The S&P/Case-Shiller index of property values increased 4.9 per cent from April 2014 after climbing 5 per cent in the year ended in March, the group said Tuesday in New York. The median estimate of 31 economists surveyed by Bloomberg called for a 5.5 per cent advance. Nationally, prices rose 4.2 per cent.
A pickup in sales as the job market improves and younger Americans start venturing out on their own means gains in home prices will probably accelerate as demand outstrips supply. Rising residential real-estate values will, in turn, help owners rebuild equity and spur builders to take on more projects, leading to increases in spending and investment that will give the economy a boost.
"There's no reason to think home prices won't continue to rise at a decent clip," Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report.
Economists' estimates in the Bloomberg survey ranged from gains of 4.7 per cent to 5.8 per cent. The S&P/Case-Shiller index is based on a three-month average, which means the April figure also was influenced by transactions in March and February.
Home prices in the 20-city index adjusted for seasonal variations increased 0.3 per cent in April from the prior month, less than the Bloomberg survey median of 0.8 per cent.
All 20 cities in the index showed a year-over-year gain, led by a 10.3 per cent increase in Denver. Prices climbed 10 per cent in San Francisco.
The price increases decelerated in 11 cities in April from the same time in 2014.
The year-over-year gauge, based on records dating back to 2001, provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.
Measured against a month earlier, property prices rose in 11 cities in April, according to the seasonally adjusted data. They jumped 1 per cent in Minneapolis. The biggest decrease was in Cleveland, where they fell 0.5 per cent. Values were little changed in Tampa.
A dearth of supply is keeping prices in most areas rising as more Americans consider home purchases. While the number of previously owned homes for sale rose 1.8 per cent in May to 2.3 million, at the current sales pace, it would take 5.1 months to sell those houses, National Association of Realtors data show. That's down from 5.2 months at the end of the prior month.
Low inventories are keeping homebuilders such as Miami- based Lennar Corp. optimistic about the industry's momentum.
"There's a need for shelter across the country and there's very little inventory and almost no likelihood of mortgage foreclosures given the stringent underwriting standards of the past years," Chief Executive Officer Stuart Miller said in a June 24 earnings call.
"This year's spring selling season confirms that the market is continuing to improve at a very consistent pace."
Existing-home sales rose in May to a 5.35 million annualized rate, the highest level since November 2009, the National Association of Realtors reported last week. The share of first-time buyers matched the highest level since September 2012.
While housing starts declined 11.1 per cent in May to a 1.04 million annualized rate, that followed a revised 1.17 million pace in April to cap the best back-to-back readings since late 2007, according to Commerce Department figures. Permits for future projects rose to the highest level in almost eight years.
A brightening employment picture and signs of an emergence in wage growth are luring buyers to the market. Payrolls rose by 280,000 in May, the biggest increase in five months, and the unemployment rate edged up to 5.5 per cent from 5.4 per cent in April as more workers joined the labour force. So far this year, job gains have averaged 217,400 a month after 259,670 in 2014.
The Labour Department is set to report June labour-market figures on July 2. Employers added 230,000 jobs in June, according to the Bloomberg survey median.
Some indicators have shown pay growth is strengthening. Private wages, which exclude government workers, rose at the fastest year-over-year pace since 2008, according to the Labour Department's April 30 report on employment costs.
The agency's monthly employment report showed a more moderate 2.3 per cent gain in average hourly earnings in May from a year earlier. While that was the strongest since August 2013, it's still close to the 2 per cent average since the start of the expansion.