Home Prices Jump in June Amid Higher Rates, Trulia Says
NEW YORK (TheStreet) -- Higher interest rates are expected to slow the pace of home price gains, but it may be a while before we see evidence of it in home prices.
Real estate company Trulia just released its June Price Monitor, which tracks asking prices -- a leading indicator of home prices.
"Despite rising mortgage rates, prices show no sign of slowdown -- yet," Trulia economist Jed Kolko said.
Asking prices were up 10.7% year-over-year in June and was up in 99 out of the top 100 metros (Philadelphia saw prices dip by a negligible 0.01% year-over-year). Excluding foreclosures, prices were up 11.4%.
Prices were up 1.5% on a seasonally adjusted basis. Asking prices have risen between 1.2% and 1.5% every month.
Trulia's price monitor adjusts for the changing mix of homes sold.
In Oakland, Sacramento, and Las Vegas, prices rose more than 30% year-over-year.
Markets that bottomed as late as six months ago are now seeing strong price increases. Edison- New Brunswick, New Jersey, Chicago Illinois and Baltimore, Maryland, for instance, saw asking prices rise more than 7% year-over-year in June.
The strong rise in home prices coupled with a recent jump in mortgage interest rates has meant that potential first-time homebuyers are now experiencing "sticker shock." Monthly mortgage payments are likely to be much higher than they anticipated originally and it could deter them from buying a home or at the very least, lead them to buy a smaller home.
In the past year, buying a home has become 20 percent more expensive," Kolko said in a statement. "Roughly half of this higher cost comes from soaring home prices, which are up almost 11 percent in the past year. The other half comes from rising mortgage rates, which have added another 10 percent to the overall cost of homeownership. For young first-time homebuyers who don't remember life during and before the bubble, these rising costs are a rude awakening."
Mortgage applications declined 11.7% from a week earlier as mortgage rates hit a two-year high, according to the Mortgage Bankers Association's weekly Mortgage Applications Survey.
The 30-year mortgage rate jumped to 4.58% from 4.46% in the previous week and is at its highest level since July 2011.
Analysts expect home price gains to moderate later this year, as rising interest rates cool buyer demand, while additional inventory will also likely ease the tight supply situation.
-- Written by Shanthi Bharatwaj in New York.
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