Market Recap: Home Prices Ease, Private Payrolls Slow, Pending Home Sales Drop
Mortgage rates continued their downward trend this week, though there was no significant movement to report. The S&P Core-Logic Case-Shiller home price index showed home price appreciation has started to ease up as mortgage rates climb. The ADP employment report continued to show a strong labor market. Pending home sales declined, as limited for-sale inventory continues to create a competitive market.
Home prices appreciated again in March, but at a slower pace, giving home buyers a break. Month-over-month prices are up 0.4% and annually prices are up 6.5%. Leading the charts again are Seattle, Las Vegas, and San Francisco, each posting double digit annual gains. David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices warns low inventory levels are the main catalyst for rapid home price appreciation. He explained, “Months-supply, which combines inventory levels and sales, is currently at 3.8 months, lower than the levels of the 1990s […] Until inventories increase faster than sales, or the economy slows significantly, home prices are likely to continue rising.”
The ADP employment report showed the addition of 178,000 private payroll jobs in May, below expectations. April’s numbers were revised lower. Small businesses added 38,000 jobs, medium-sized businesses added 84,000 jobs, and large firms added 56,000 jobs. The labor market is the tightest it has been in almost two decades, with the unemployment rate at a 17-year low. Even with the 3.9% unemployment rate, job growth is solid, and the biggest issue faced by employers is finding qualified candidates to fill open positions.
Pending home sales, or the number of homes under contact but not yet closed, declined in April. Sales are down 1.3% month-over-month and 2.1% year-over-year. The biggest concern, voiced by realtors, is the low level of available for sale inventory. National Association of Realtors (NAR) chief economist Lawrence Yun described a competitive market in the release, explaining, “listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher.”
Rock bottom mortgage rates since economic recovery started have allowed for home prices to increase more rapidly. However, most households have a maximum budget they can allocate toward housing costs. With mortgage rates likely to continue climbing, home price appreciation will most likely start to slow down.
Sources: Bloomberg, CNBC, CNBC, MarketWatch, MarketWatch, Mortgage News Daily