Home prices in 20 U.S. cities rose in the 12 months through July by the most in more than seven years, helping boost owner equity.
The S&P/Case-Shiller index of property values in 20 cities increased 12.4% from July 2012, matching the median projection of 31 economists surveyed by Bloomberg and the biggest year-to-year advance since February 2006, a report from the group showed today in New York. On a month-to-month basis, price appreciation slowed.
Gains in home and stock values are contributing to increases in household wealth that are helping bolster consumer spending, the biggest part of the economy. Nonetheless, the appreciation in property values may cool over the rest of the year as mortgage rates close to a two-year high temper demand.
Price increases “will start to slow down to a fairly sustainable pace,” said Brian Jones, a senior U.S. economist at Societe Generale in New York and the best home-price forecaster over the past two years, according to data compiled by Bloomberg. “The increase in mortgage rates will slow things down a bit at the margin. As the economy does better, people will be in a better position to weather the higher rates.”
Another home-price gauge also showed improvement. Values climbed 1% in July from the prior month after a 0.7% increase in June, according to figures from the Federal Housing Finance Agency.
Consumer confidence in September dropped to a four-month low, another report showed. The Conference Board’s sentiment index decreased to 79.7, the weakest since May, from a revised 81.8 in August, according to data from the New York-based private research group. The measure averaged 53.7 during the recession that ended in June 2009.
Stocks fell as investors weighed the data for signs on the economy’s strength. The Standard & Poor’s 500 Index declined 0.3% to 1,696.99 at 10:05 a.m. in New York.
Estimates in the Bloomberg survey for home prices ranged from gains of 10% to 13%. The S&P/Case-Shiller index is based on a three-month average, which means the July figure was also influenced by transactions in June and May.
The July reading compared with June’s 12.1% year- over-year advance.
Home prices adjusted for seasonal variations rose 0.6% in July from the prior month, less than the Bloomberg survey median, which called for a 0.8% increase. Monthly advances over the past three months have averaged 0.8%, the least over similar periods so for this year.