Home Prices Go Up Even As Mortgage Rates Keep Increasing

Pre-market futures are treating the indices’ first trading week in the green for many weeks about how you’d expect: sliding back into the red. On this final trading day for the month of May, the Dow is down -234 points, the S&P 500 is -30 and the Nasdaq is off -66 points from Friday’s close.

Eurozone inflation reached a fresh all-time high at +8.1% year over year for May, beating expectations by 30 basis points and higher than the previous record +7.4% in April. Germany leapt to +8.7% and France reached a record-high +5.8%. And now the EU is rejecting Russian oil (aside from a few exceptions, like Hungary), we can expect high prices for longer, at least until the West can help accommodate some of the fuel supply chain of oil and gas for Europe.

Here at home the S&P Case-Shiller Home Price Index for March came in at +20.6%, demonstrating year over year growth did not slow down even as mortgage rates had already begun to rise, at least a couple months ago. The 10-city survey came in at +19.5% from +18.7% in February; the 20-city went to +21.2% versus +20.3% previously.

We started the year with a 30-year fixed mortgage rate average of around 3.3%, and that rose to 4.67% in March. Based on other mortgage data out for April we can expect this number to move up to around 5.5% when this next report comes out. We may have also seen housing activity pulled forward to the early part of the year because consumers knew mortgage rates were going to be on the way up.

For the first time in three years, Phoenix is no longer #1 in U.S, home price growth. That honor now goes to Tampa, which led all cities in price growth to 34.8%. Phoenix slid to #2, 32.4%, followed by Miami at 32.0%. The lowest-performing cities were all still up double digits: Chicago 13.0%, Washington DC was 12.9% and Minneapolis 12.4%. Clearly, warm climates are still preferred to colder and/or swampier ones.

This data represents a lagging indicator, however, so reading the tea leaves here regarding housing numbers affecting inflation metrics is not quite the same as in the extensive housing data we saw last week. That said, Case-Shiller is considered the most accurate of housing price indices, so we move forward with confidence we understand the housing market as of the end of Q1.

After today’s open, we’ll get some new data for May, on Consumer Confidence and Chicago PMI. Both are expected to tack down gradually but notably, to 103.9 from 107.3 previously and 55.9 from 56.4, respectively.

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