Despite the gathering clouds over the housing market, there's one constant: Home prices continue to climb higher.
Data released this morning showed that property values in 20 major metropolitan areas rose by 12.1% in the month of June over the same month last year. And compared to May, they were 0.89% higher on a seasonally adjusted basis.
"National home prices rose more than 10% annually in each of the last two quarters," said David Blitzer, chairman of the S&P/Case-Shiller index committee. "However, the monthly city by city data show the pace of price increases is moderating."
Even if the pace of price increases is moderating, the news is nevertheless a welcome relief given a recent downturn in other housing statistics. The most notable was last week's announcement that new home sales fell by 12.4% on a month-over-month basis in July.
The primary culprit for the slowdown is widely believed to be rising mortgage rates. According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage rose to 4.58% last week. This is more than 100 basis points above the low set in May.
On the heels of this news, Wells Fargo (NYSE:WFC), the nation's largest mortgage originator, announced it will lay off 2,300 employees from its home-lending department. The mortgage giant has ridden the housing recovery to seven consecutive quarters of more than $100 billion in home loan originations. On the last few conference calls, however, its executives have been circumspect about its ability to continue with this trend given the upward climb in rates.
Recent setbacks aside, the housing market in general has been in the midst of a robust recovery over the last year. And the impact is making its way to the bottom line of companies that cater to the industry.
Last week, the two largest home improvement retailers both reported dramatically better quarterly results. Home Depot (NYSE:HD) said its same-store sales shot up by 10.7% compared to the same quarter last year, while Lowe's (NYSE:LOW) notched comparable sales of 9.6%. Both companies also had impressive top- and bottom-line results, expanding their revenue and earnings figures considerably.
The big question going forward is how the homebuilders will fare in this environment. When Beazer Homes (NYSE:BZH) released earnings earlier this month, investors learned that the company's new orders and backlog for the three months ended June 30 fell by 11.2% and 2.6%, respectively.
By comparison, the nation's largest homebuilder, D.R. Horton (NYSE:DHI), noted at the end of July that its new orders and backlog had grown by 30% and 36%, respectively. In addition, its CEO sounded a positive note about the remainder of the year: "Our strengthening operating metrics combined with our backlog of 9,911 homes at June 30, 2013 position us for a strong finish to our fiscal year."