Case-Shiller: National House Price Index Decreased 0.5% year-over-year in May

"U.S. house prices rose in May, up 0.7 percent from April, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI®). "

S&P/Case-Shiller released the monthly Home Price Indices for May ("May" is a 3-month average of March, April and May closing prices). May closing prices include some contracts signed in January, so there is a significant lag to this data. Here is a graph of the month-over-month (MoM) change in the Case-Shiller National Index Seasonally Adjusted (SA).

The MoM increase in the seasonally adjusted Case-Shiller National Index was at 0.74%. This was the fourth consecutive MoM increase following seven straight MoM decreases.

On a seasonally adjusted basis, prices declined in only 1 of the 20 Case-Shiller cities on a month-to-month basis. The only monthly decline seasonally adjusted was in Phoenix (-0.1%). Seasonally adjusted, Seattle has fallen 12.5% from the recent peak, San Francisco is down 11.8% from the peak, Las Vegas is down 9.0%, and Phoenix is down 8.5%. All 20 cities have seen price declines from the recent peak (SA).

FHFA House Price Index

On the FHFA index: FHFA House Price Index Up 0.7 Percent in May; Up 2.8 Percent from Last Year

U.S. house prices rose in May, up 0.7 percent from April, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI®). House prices rose 2.8 percent from May 2022 to May 2023. The previously reported 0.7 percent increase in April remained unchanged.

“U.S. house prices increased moderately in May, continuing the trend of the last few months,” said Dr. Nataliya Polkovnichenko, Supervisory Economist in FHFA’s Division of Research and Statistics. “However, house prices in some regions of the country remained below the levels seen one year ago.”
emphasis added

The monthly index increased 0.7% in May. Here is a graph from the FHFA report showing the annual change by region for May 2023 compared to May 2022. Prices have decreased YoY in the Pacific and Mountain regions but are up YoY everywhere else. Note that the Year-over-year increase is smaller this year, compared to the YoY increase in May 2022 in all of the nine regions.

Case-Shiller House Prices

From S&P S&P CoreLogic Case-Shiller Index Repeats Gains in May

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a -0.5% annual decrease in May, down from a loss of -0.1% in the previous month. The 10-City Composite showed a decrease of -1.0%, which is a tick up from the -1.1% decrease in the previous month. The 20-City Composite posted a -1.7% year-over-year loss, same as in the previous month.
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Before seasonal adjustment, the U.S. National Index posted a 1.2% month-over-month increase in May, while the 10-City and 20-City Composites both posted increases of 1.5%.

After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 0.7%, while the 10-City Composite gained 1.1% and 20-City Composites posted an increase of 1.0%.

“The rally in U.S. home prices continued in May 2023,” says Craig J. Lazzara, Managing Director at S&P DJI. “Our National Composite rose by 1.2% in May, and now stands only 1.0% below its June 2022 peak. The 10- and 20-City Composites also rose in May, in both cases by 1.5%.

“The ongoing recovery in home prices is broadly based. Before seasonal adjustment, prices rose in all 20 cities in May (as they had also done in March and April). Seasonally adjusted data showed rising prices in 19 cities in May, repeating April’s performance. (The outlier is Phoenix, down 0.1% in both months.) On a trailing 12-month basis, the National Composite is 0.5% below its May 2022 level, with the 10- and 20-City Composites also negative on a year-over-year basis.

“Regional differences continue to be striking. This month’s league table shows the Revenge of the Rust Belt, as Chicago (+4.6%), Cleveland (+3.9%), and New York (+3.5%) were the top performers.
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 1.1% in May (SA) and down 1.6% from the recent peak in June 2022. The Composite 20 index is up 1.0% (SA) in May and down 2.3% from the recent peak in June 2022. The National index is up 0.7% (SA) in May and is down 1.0% from the peak in June 2022.

The Composite 10 SA is down 1.1% year-over-year.  The Composite 20 SA is down 1.8% year-over-year. The National index SA is down 0.5% year-over-year.

House Prices and Inventory

This graph below shows existing home months-of-supply, inverted, from the National Association of Realtors® (NAR) vs. the seasonally adjusted month-to-month price change in the Case-Shiller National Index (both since January 1999 through May 2023). Note that the months-of-supply is not seasonally adjusted.

The last 13 months are in black showing a shift in the relationship, and prices fell for seven months with low levels of inventory!

In May, the months-of-supply was at 3.0 months, and the Case-Shiller National Index (SA) increased 0.74% month-over-month.  Historically prices haven’t declined until inventory reached 6 months of supply. See: House Price Battle Royale: Low Inventory vs Affordability

In the June existing home sales report, the NAR reported months-of-supply increased to 3.1 months.

The year-over-year Case-Shiller price changes were at expectations.

Here are the 30-year mortgage rates according to the Freddie Mac PMMS:

The May report was mostly for contracts signed in the January through April period and was likely boosted by somewhat lower rates in the first half of 2023.

The recent increase in mortgage rates to near 7% will not impact the Case-Shiller index until reports are released in the Fall.

Comparing to Median House Prices

Here is a comparison of year-over-year change in median house prices from the NAR and the year-over-year change in the Case-Shiller index. Median prices are distorted by the mix and repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices. However, in general, the Case-Shiller index follows the median price.

The median price was down 0.9% year-over-year in June, and, as expected, the Case-Shiller National Index was down 0.5% year-over-year in the May report.

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

Seasonally adjusted house prices have increased over the last four months, and the big question is “Will house prices decline further later this year?”