Case-Shiller: National House Price Index "Continued its Deceleration" to 15.8% year-over-year increase in July

FHFA: "House prices fell nationwide in July, down 0.6 percent from the previous month"

Both the Case-Shiller House Price Index (HPI) and the Federal Housing Finance Agency (FHFA) HPI for July 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 “July” is a 3-month average of May, June and July closing prices. May closing prices include some contracts signed in March, so there is a significant lag to this data.

The MoM decrease in Case-Shiller was at -0.24%. This was the first MoM decrease since February 2012, and since this includes closings in May and June, this suggests prices fell sharply in July.

On a seasonally adjusted basis, prices declined in 12 of the 20 Case-Shiller cities on a month-to-month basis: Phoenix, Los Angeles, San Diego, San Francisco, Denver, Washington DC, Boston, Detroit, Minneapolis, Portland, Dallas and Seattle all saw month-to-month price declines in the July report.

FHFA House Price Index

On the FHFA index: FHFA House Price Index Down 0.6 Percent in July; Up 13.9 Percent from Last Year

House prices fell nationwide in July, down 0.6 percent from the previous month, according to the latest Federal Housing Finance Agency House Price Index (FHFA HPI®). House prices rose 13.9 percent from July 2021 to July 2022. The previously reported 0.1 percent price increase in June 2022 remained unchanged. …

“U.S. house price index posted its first month-over-month decrease in July since May 2020 when the U.S. economy experienced lockdowns as a result of COVID-19. This decline was widespread as eight of the nine census divisions saw a decrease,” said Will Doerner, Ph.D., Supervisory Economist in FHFA’s Division of Research and Statistics. “The 12-month change in house prices remains at historically high rates, but the rate of growth continues to moderate across all census divisions.” 
emphasis added

The monthly index decreased 0.6% in July. Here is a graph from the FHFA report showing the annual change by region for July 2022 compared to July 2021. Prices have increased sharply everywhere. Note that the Year-over-year increase is smaller this year, compared to the YoY increase in July 2021 in all of the nine regions.

Case-Shiller House Prices

From S&P: S&P Corelogic Case-Shiller Index Continued its Deceleration in July

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 15.8% annual gain in July, down from 18.1% in the previous month. The 10-City Composite annual increase came in at 14.9%, down from 17.4% in the previous month. The 20-City Composite posted a 16.1% year-over-year gain, down from 18.7% in the previous month.
...
Before seasonal adjustment, the U.S. National Index posted a -0.3% month-over-month decrease in July, while the 10-City and 20-City Composites both posted decreases of -0.8%.

After seasonal adjustment, the U.S. National Index posted a month-over-month decrease of -0.2%, and the 10-City and 20-City Composites posted decreases of -0.5% and -0.4%, respectively.

In July, only 7 cities reported increases before and after seasonal adjustments.

“Although U.S. housing prices remain substantially above their year-ago levels, July’s report reflects a forceful deceleration,” says Craig J. Lazzara, Managing Director at S&P DJI. “For example, while the National Composite Index rose by 15.8% in the 12 months ended July 2022, its year-over-year price rise in June was 18.1%. The -2.3% difference between those two monthly rates of gain is the largest deceleration in the history of the index. We saw similar patterns in our 10-City Composite (up 14.9% in July vs. 17.4% in June) and our 20-City Composite (up 16.1% in July vs. 18.7% in June). On a month-over-month basis, all three composites declined in July"
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 down 0.5% in July (SA). The Composite 20 index is down 0.4% (SA) in July. The National index is 65% above the bubble peak (SA), and down 0.2% (SA) in July.  The National index is up 136% from the post-bubble low set in February 2012 (SA).

The Composite 10 SA is up 14.9% year-over-year.  The Composite 20 SA is up 16.1% year-over-year. The National index SA is up 15.8% 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 July 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, prices rise quickly.

In July, the months-of-supply was at 3.2 months, and the Case-Shiller National Index (SA) decreased -0.24% month-over-month.  The black arrow points to the July 2022 dot. This appears to be an outlier with prices falling even though months-of-supply is still somewhat low. NOTE that the NAR appears to include some pending sales in their inventory, and inventory is probably up more than the NAR is reporting.

In the August existing home sales report, the NAR reported months-of-supply was unchanged at 3.2 months.

The year-over-year price increase was below expectations. Since Case-Shiller is a 3-month average, and this report was for July (includes May and June closings), this included some price increases when mortgage rates were significantly lower than today. This report includes some homes with contracts signed in March (that closed in May)!

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