Case-Shiller, FHFA House Prices Indexes and Conforming Loan Limits will be released on Tuesday
A Few House Price Topics
2023 Conforming Loan Limits
Although Case-Shiller usually receives more attention, the FHFA index will be a focus on Tuesday - since the quarterly, seasonally adjusted, FHFA Expanded-Data Indexes (Estimated using Enterprise, FHA, and Real Property County Recorder Data Licensed from DataQuick for sales below the annual loan limit ceiling) is used to set the Fannie & Freddie conforming loan limits (CLL), and the FHA insured limit.
Currently we only have data for Q2 2022 for the quarterly index (up 17.0% from Q2 2021), however, the Purchase-Only index was up 11.9% through August 2022. Clearly prices have slowed sharply in Q3.
The Expanded-Data index was at 329.27 in Q3 2021 and was at 368.67 in Q2 2021 - a gain of 12.0% over three quarters (HT Matt Graham at MortgageNewsDaily). It seems likely the quarterly index will also decline seasonally adjusted in Q3. So, the increase in the conforming loan will likely be less than 12%.
If we use 12%, the CLL will be around $725,000 in 2023. For high-cost areas like Los Angeles, the limit could increase to around $1.08 million. However, assuming some decline in Q3 prices, the CLL could in the $700,000 to $715,000 range.
Case-Shiller Index
Based on the recent monthly declines in the Case-Shiller index, the index will probably show a year-over-year (YoY) increase close to 10% in the September report. The release on Tuesday will be for “September”, but is a three-month average of July, August and September closing prices.
Since the Case-Shiller index is based on closing prices, and is a 3-month average, the September release will include some contracts signed in May that closed in July. In May, June and July, the average 30-year mortgage rates according to Freddie Mac was 5.4%. In August, rates dipped to 5.2%.
The impact of the rate increases in September and October will not be reflected in the Case-Shiller index for a few months.
Year-over-year Repeat Sales Index House Price Growth Will Slow Further
Last week, the National Association of Realtors® (NAR) reported that median house prices were up 6.6% year-over-year (YoY) in October. This is down from the peak growth rate of 25.2% YoY in May 2021.
Last month, Case-Shiller reported that the National Index was up 13.0% YoY in August, down from a YoY peak of 20.8% in March 2022.
The median prices reported by the NAR are for the most recent month only, so the prices are very timely. However, the prices can be distorted by the mix of homes sold.
Case-Shiller is a repeat sales index (they compare the current price of home to the previous sales price), and it a three-month average. So, the most recent report (for August), was actually for homes closed in June, July and August.
Although median prices can be distorted by the mix and repeat sales indexes (like Case-Shiller and the FHFA) are more accurate measures of house prices, the median price index might provide earlier hints on the direction of prices.
The following graph shows YoY price changes for the NAR median house prices, Case-Shiller National price index, and the FHFA purchase-only index (Fannie and Freddie loans only).
Most of the time, the NAR median price leads the Case-Shiller index, and even though the Case-Shiller September index will show a solid YoY gain, I expect house price growth to decelerate further in coming months and turn negative YoY soon.