U.S. home prices continued to show strong gains in July, according to two major indices released today.

Home values rose a seasonally adjusted 1.0 percent for the month, according to the Federal Housing Finance Agency's (FHFA) monthly home price index, while the Standard & Poor's/Case-Shiller 20-city index showed a one-month rise of 1.8 percent.

The FHFA index is based on purchase mortgages backed by Fannie Mae and Freddie Mac, while the S&P index is based on repeat sales of the same properties in the metro areas covered.

Both indices also showed strong annual price gains as well, with the FHFA index up 8.8 percent from its July 2012 level, with the S&P 20-city index up 12.4 percent over the same period.

Higher rates may having an effect

Home prices in the S&P index have been maintaining a 12 percent annual growth rate since April, according to David Blitzer, chair of the S&P index committee, although monthly rates of increase have slowed. He suggested that the rise in mortgage rates since last spring might be a factor.

"Following the increase in mortgage rates beginning last May, applications for mortgages have dropped, suggesting that rising interest rates are affecting housing," Blitzer said. "The Fed's announcement last week that QE3 bond buying will continue for the time being may have only a limited, though favorable, impact on housing."

Still 10-20 percent below pre-crash peak

The two indexes differ markedly on how they portray the overall recovery of the housing market. The FHFA index shows national home prices at only 9.6 percent below their pre-crash peak, reached in April 2007, and having returned to roughly the same level as in March 2005.

The S&P index, on the other hand, shows home values in the 20 cities it covers down about 22 percent from their peak value, which it says was reached in mid-2006, with prices currently back to their spring 2004 levels. The discrepancy can be attributed to the fact the two indices use very different methods for gauging the state of the housing market.

The strongest housing markets by far continue to be in the Pacific and Mountain regions of the U.S., which showed annual price gains of 20.8 and 12.7 percent in July, according to the FHFA index. The softest housing market is in the states of the East South Central region, with only a 3.8 percent annual price gain, followed by the Mid-Atlantic states, which saw an annual price increase of only 4.2 percent through July.

Published on September 24, 2013