Fannie Mae-No Politics (FNMA)

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~ FNMA = U.S. home prices show slowing growth !

10:19 AM ET 11/26/13 | Marketwatch

WASHINGTON (MarketWatch) -- U.S. home prices in September grew at the slowest monthly pace since February, adding to other recent evidence that the housing market's rebound is starting to slow, according to reports released Tuesday morning.

On a year-over-year basis, home prices grew 13.3% in September, the fastest annual pace since February 2006, though prices remained about 20% below a 2006 peak, according to S&P/Case-Shiller 20-city composite data released Tuesday.

Las Vegas and other cities that were hit particularly hard when the bubble burst have seen some of the fastest price gains. In September, Las Vegas posted the quickest annual growth, with prices up 29.1%. However, home prices there remain about 46% below a local 2006 peak.

Looking at monthly results, U.S. home prices rose 0.7% in September, the smallest gain since February, as 19 of 20 cities tracked by S&P/Case-Shiller saw lower growth. After seasonal adjustments, home prices in September rose 1%, up from 0.9% in August, but down from 1.9% monthly growth earlier this year.

"The strong price gains in the West are sparking questions and concerns about the possibility of another bubble. However the talk is focused on fear of a bubble, not a rush to join the party and buy," said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.

The trend was echoed in a separate home-price report released Tuesday by the government. According to the Federal Housing Finance Agency, which regulates mortgage buyers Fannie Mae FNMA) and Freddie Mac FMCC) , U.S. prices rose a seasonally adjusted 0.3% in September, "notably below appreciation rates observed earlier this year and in late 2012," said Andrew Leventis, FHFA's principal economist.

While pent-up demand and limited inventory have supported the recovery in home prices, other recent data signal that the overall market is starting to shift to slower growth. For example, the seasonally adjusted sales pace of existing homes recently fell to the lowest pace in four months, according to the National Association of Realtors.

Rising mortgage rates are taking a bite out of housing demand, a trend that economists expect to continue. Home prices could slow to "a more sustainable" annual-growth rate of between 5% and 8% in coming months, said Millan Mulraine, U.S. research and strategy director at TD Securities.

"As more potential homeowners become priced out of the market given higher prices and borrowing rates, the sustainability of these price gains could eventually come into question and we expect the pace of price appreciation to moderate," Mulraine said.

Mortgage rates started rising in early May on speculation about the Federal Reserve starting to cut its massive asset-purchase program. Eventually, the central bank will go ahead and actually start to taper, cutting downward pressure on long-term rates.

[color=red]"The net read from these [home price] data points is that the back up in mortgage rates has stalled the housing market recovery,"[/color] said Steven Ricchiuto, chief economist of Mizuho Securities USA.

However, builders remain optimistic. A government report on Tuesday signaled that future home building may speed up, as construction permits rose in October, led by applications for apartments and other multi-family dwellings.

Investors traded up shares of the country's three largest home builders Tuesday, making them among the 10 most-advancing stocks in the S&P 500 SPX). Shares of D.R. Horton DHI) and PulteGroup PHM) were recently up almost 3%, while shares of Lennar LEN) were up almost 4%.