House Prices Increase Sharply in June

Both the Case-Shiller House Price Index (HPI) and the Federal Housing Finance Agency (FHFA) HPI were released today.

First, here is a graph of the month-over-month change in the Case-Shiller National Index (SA).

The last four months have all seen record month-over-month price increases, and the last 11 months have all been historically very strong.

FHFA House Price Index and Conforming Loan Limit

As I discussed in How Much will the Fannie & Freddie Conforming Loan Limit Increase for 2022?, the FHFA HPI is used to determine the increase in the Conforming Loan Limit.

First, on the FHFA index: U.S. House Prices Rise 17.4 Percent over the Last Year; Up 4.9 Percent from the First Quarter

U.S. house prices rose 17.4 percent from the second quarter of 2020 to the second quarter of 2021 according to the Federal Housing Finance Agency House Price Index (FHFA HPI®). House prices were up 4.9 percent compared to the first quarter of 2021. FHFA’s seasonally adjusted monthly index for June was up 1.6 percent from May.

“During the second quarter, house prices peaked in June with an 18.8 percent growth rate compared to a year ago,” said Dr. Lynn Fisher, Deputy Director of FHFA’s Division of Research and Statistics. “For the quarter, annual gains surpassed 20 percent in the Mountain, New England, and Pacific census divisions and in all of the top 20 metro areas.”

The index used to calculate the conforming loan limit was up 16.5% in Q2. The limit is updated annually, and is adjusted using the FHFA’s quarterly national, seasonally adjusted, expanded-data index: Expanded-Data Indexes (Estimated using Enterprise, FHA, and Real Property County Recorder Data Licensed from DataQuick for sales below the annual loan limit ceiling). The adjustment is based on the House Price Index value in Q3 divided by Q3 in the prior year - so we need the Q3 data.

There will be large increase in the conforming loan limit for 2022.

Case-Shiller House Prices

From S&P: S&P Corelogic Case-Shiller Index Shows Annual Home Price Gain Topped 18.6% In June

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 18.6% annual gain in June, up from 16.8% in the previous month. The 10-City Composite annual increase came in at 18.5%, up from 16.6% in the previous month. The 20-City Composite posted a 19.1% year-over-year gain, up from 17.1% in the previous month.
Before seasonal adjustment, the U.S. National Index posted a 2.2% month-over-month increase in June, while the 10-City and 20-City Composites both posted increases of 1.8% and 2.0%, respectively.

After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 1.8%, and the 10-City and 20-City Composites both posted increases of 1.6% and 1.8%, respectively. In June, all 20 cities reported increases before and after seasonal adjustments.

“June 2021 is the third consecutive month in which the growth rate of housing prices set a record, says Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI. “The National Composite Index marked its thirteenth consecutive month of accelerating prices with an 18.6% gain from year-ago levels, up from 16.8% in May and 14.8% in April. This acceleration is also reflected in the 10- and 20-City Composites (up 18.5% and 19.1%, respectively). The last several months have been extraordinary not only in the level of price gains, but in the consistency of gains across the country. In June, all 20 cities rose, and all 20 gained more in the 12 months ended in June than they had gained in the 12 months ended in May. Home prices in 19 of our 20 cities (all but Chicago) now stand at all-time highs, as do the National Composite and both the 10- and 20-City indices.

June’s 18.6% price gain for the National Composite is the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data.
emphasis added

The first 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 1.6% in June (SA).

The Composite 20 index is up 1.8% (SA) in June.

The National index is 40% above the bubble peak (SA), and up 1.8% (SA) in June.  The National index is up 90% from the post-bubble low set in February 2012 (SA).

The second graph shows the year-over-year change in all three indices.

The Composite 10 SA is up 18.5% compared to June 2020.  The Composite 20 SA is up 19.1% year-over-year.

The National index SA is up 18.6% 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 2021).

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 very low (like now), prices rise quickly.

In June, the months-of-supply was at 2.5 months, and the Case-Shiller National Index (SA) increased 1.8% month-over-month (a month-over-month record).  The black arrow points to the June dot.

In the June existing home sales report released last week, the NAR reported months-of-supply increased to 2.6 month in July. There is a seasonal pattern to inventory, but this is still very low - and prices are increasing sharply.

The normal level of inventory is probably in the 4 to 6 months range.