Case-Shiller National House Price Index "Decelerated" to 18.0% year-over-year increase in June

FHFA: "[A] deceleration has appeared in the June monthly data”

Both the Case-Shiller House Price Index (HPI) and the Federal Housing Finance Agency (FHFA) HPI for June were released today. Here is a graph of the month-over-month (MoM) change in the Case-Shiller National Index Seasonally Adjusted (SA).

The Case-Shiller Home Price Indices for “June” is a 3-month average of April, May and June closing prices. June closing prices include some contracts signed in February, so there is a significant lag to this data.

The MoM increase in Case-Shiller was at 0.33%. This was the smallest MoM increase since June 2020, and since this includes closings in April and May, this suggests price growth stalled in June.

On a seasonally adjusted basis, prices declined in 7 of the 20 Case-Shiller cities: Seattle, San Francisco, San Diego, Portland, Los Angeles, Denver and Washington, DC all saw price declines in the June report.

FHFA House Price Index

On the FHFA index: U.S. House Prices Rise 17.7 Percent over the Last Year; Up 4.0 Percent from the First Quarter

U.S. house prices rose 17.7 percent from the second quarter of 2021 to the second quarter of 2022 according to the Federal Housing Finance Agency House Price Index (FHFA HPI®). House prices were up 4.0 percent compared to the first quarter of 2022.  FHFA’s seasonally adjusted monthly index for June was up 0.1 percent from May.

“Housing prices grew quickly through most of the second quarter of 2022, but a deceleration has appeared in the June monthly data” said William Doerner, Ph.D., Supervisory Economist in FHFA’s Division of Research and Statistics. “The pace of growth has subsided recently, which is consistent with other recent housing data.” 
emphasis added

The monthly index only increased 0.1% in June. Here is a graph from the FHFA report showing the annual change by region for June 2022 compared to June 2021. Prices have increased sharply everywhere. Note that the Year-over-year increase is smaller this year, compared to the YoY increase in June 2021 in six of the nine regions.

Case-Shiller House Prices

From S&P: S&P Corelogic Case-Shiller Index Decelerated in June

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported an 18.0% annual gain in June, down from 19.9% in the previous month. The 10-City Composite annual increase came in at 17.4%, down from 19.1% in the previous month. The 20-City Composite posted an 18.6% year-over-year gain, down from 20.5% in the previous month.
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Before seasonal adjustment, the U.S. National Index posted a 0.6% month-over-month increase in June, while the 10-City and 20-City Composites both posted increases of 0.4%.

After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 0.3%, and the 10-City and 20-City Composites posted increases of 0.3% and 0.4%, respectively.

In June, 13 cities reported increases before and after seasonal adjustments.

“The deceleration in U.S. housing prices that we began to observe several months ago continued in June 2022, as the National Composite Index rose by 18.0% on a year-over-year basis,” says Craig J. Lazzara, Managing Director at S&P DJI. “Relative to May’s 19.9% gain (and April’s 20.6%), prices are clearly increasing at a slower rate. This pattern is consistent with our 10-City Composite (up 17.4% in June vs. 19.1% in May) and our 20-City Composite (up 18.6% in June vs. 20.5% in May). It’s important to bear in mind that deceleration and decline are two entirely different things, and that prices are still rising at a robust clip. June’s growth rates for all three composites are at or above the 95th percentile of historical experience. For the first six months of 2022, in fact, the National Composite is up 10.6%. In the last 35 years, only four complete years have witnessed increases that large."
emphasis added

This graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is up 0.3% in June (SA). The Composite 20 index is up 0,4% (SA) in June. The National index is 66% above the bubble peak (SA), and up 0.3% (SA) in June.  The National index is up 136% from the post-bubble low set in February 2012 (SA).

The Composite 10 SA is up 17.4% year-over-year. The Composite 20 SA is up 18.6% year-over-year. The National index SA is up 18.0% year-over-year.

House Prices and Inventory

This graph below shows existing home months-of-supply (inverted, from the NAR) vs. the seasonally adjusted month-to-month price change in the Case-Shiller National Index (both since January 1999 through June 2022).

Note that the months-of-supply is not seasonally adjusted.

There is a clear relationship, and this is no surprise (but interesting to graph).  If months-of-supply is high, prices decline. If months-of-supply is low (like now), prices rise quickly.

In June, the months-of-supply was at 2.9 months, and the Case-Shiller National Index (SA) increased 0.33% month-over-month.  The black arrow points to the June 2022 dot. In the July existing home sales report, the NAR reported months-of-supply increased to 3.3 months.

Since inventory is now increasing (but still low), we should expect price increases to continue to slow. The normal level of inventory is probably in the 4 to 6 months range.

This was below expectations. There is a significant lag to this data, see: When will House Price Growth Slow? Since Case-Shiller is a 3-month average, and this report was for June (includes April and May closings), this included price increases when mortgage rates were significantly lower than today. This report includes some homes with contracts signed in February (that closed in April)!

Note: I’ll have more on real prices, price-to-rent and affordability tomorrow.