Housing prices firm

Both Case Shiller and Radar Logic report strong gains in housing prices a few months ago. Home prices are up about 10% year over year.

But price increases are slowing on the margin, as shown in the first chart above. The second chart above compares the Radar Logic house price series for 2011, 2012, and 2013. Note that this year, prices fell in late April and early May, when the usual seasonal pattern is for them to rise. No doubt the housing market has gotten a case of the same jitters that affected the bond market in recent months after the Fed began discussing an early end to its bond-buying. New mortgage applications for home purchases have dropped about 10% in the past few months.

As the chart above shows, 30-yr fixed rate mortgages have jumped almost 1 full point in recent months. I doubt this will kill the housing market, but it seems likely to put a damper on home buying enthusiasm for awhile.

Meanwhile, on an inflation-adjusted basis, prices today are about the same as they were back in 2009; the recent price increases have merely offset the impact of inflation in the past four years.

What we see here so far is more in the nature of a stabilization and consolidation of the housing market which will eventually lead to a stronger recovery over time.