Home prices showed solid gain in August

WASHINGTON - The U.S. housing sector is shrugging off a slowdown in the economy.

The Standard & Poor's/Case-Shiller 20-city home price index rose 5.1 percent in the 12 months ending in August, according to figures released Tuesday. That's up from a 4.9 percent pace in July.

Jim O'Sullivan, chief U.S. economist with High Frequency Economics, said in a note that pace of growth is a "fair measure" of the underlying trend in home prices.

Home prices have risen at a 5 percent pace for most of this year, which economists see as more sustainable than last year's double-digit gains. Three years of solid hiring and historically low mortgage rates have enabled more Americans to buy homes. That's lifted sales of existing homes nearly 9 percent in the past year.

San Francisco and Denver both reported annual price gains of 10.7 percent, the largest of any city. Portland, Oregon's annual gain of 9.4 percent was the third largest.

On a month-over-month basis, the 20-city price index climbed 0.4 percent in August from July. Eighteen of 20 cities said prices increased. Prices slipped 0.1 percent in San Francisco and were unchanged in Charlotte, North Carolina.

The Case-Shiller index covers roughly half of U.S. homes. The index measures prices compared with those in January 2000 and creates a three-month moving average. The August figures are the latest available.

Sales of existing homes jumped 4.7 percent in September to a seasonally adjusted annual rate of 5.55 million, the fastest pace in 11 months. That's a reassuring sign that the housing sector has so far been insulated from weaker growth overseas that is slowing growth in the U.S. manufacturing and energy sectors.

Yet overall the housing market's health is mixed. New home sales plunged in September to their lowest level since November 2014 and remain far below their long-run average.

The construction of new homes rose at a healthy pace in September and is up 12 percent so far this year compared with 2014. But the bulk of the growth has been fueled by condominiums and apartment buildings. Single-family home construction was flat in September.

That reflects a greater preference for renting rather than home-buying since the Great Recession, which has pushed the percentage of Americans who own homes to a 48-year low of 63.4 percent.

More single-family home building is needed to boost overall supplies, hold down price gains and give potential buyers more choices.

"We expect the housing market to continue to make measured progress amid the backdrop of improving demographics and incomes as well as moderate price appreciation," said Kristin Reynolds, an economist with research firm IHS.

The number of existing homes for sales has fallen 3.1 percent in the past 12 months. In September, the number of available homes was equal to just 4.8 months' of sales, below the six months that is typical of a balanced market.

Low mortgage rates are helping would-be buyers. The average rate on a 30-year fixed mortgage fell to 3.79 percent last week, its 13th straight week below 4 percent.

Although the housing market continues to recover, the economy slowed down sharply between July and September. Most forecasters expect gross domestic product for the period of well under 2 percent, which would represent a sharp slowdown from the 3.9 percent annualized rate of expansion in the second quarter.

The U.S. Commerce Department is scheduled to release an initial estimate of third-quarter GDP on Thursday.