INDICATOR: May Federal Housing Finance Agency Home Prices
KEY DATA: FHFA: +0.7%; Year-over-Year: +7.3%
IN A NUTSHELL: "Home prices continue to rise but the pace may be slowing."
WHAT IT MEANS: Home price increases have tremendous impacts on the economy as consumer feel more wealthy and households build equity that allows them to get out from under and sell their homes. Those gains are continuing. The Federal Housing Finance Agencies index rose strongly in May. However, two regions, East South Central and Mountain, were down and the West North Central area was flat. It looks like the middle part of the nation has hit a soft spot. In contrast, the East Coast, from New England to the Middle and South Atlantic states, continue show strong increases in prices. The Northeast had lagged and it appears to be finally catching up. Nationally, the gain over the year was still solid but it seems to have plateaued. The increase was the same as in April but lower than the peak rise, which was posted in March. Prices remain over 12% below the peak but they are clearly coming back and should take out the former top in about two years. Since the data have been published, starting January 1991, prices are up at a 3.2% annualized pace. That didn't make housing a particularly good investment for all those people who bought and held.