The Sharp Slowdown in Year-over-year House Price Growth
This morning, CoreLogic released their House Price Index for July (the most recent Case-Shiller release was for “June”). The CoreLogic HPI is a three-month weighted average and is not seasonally adjusted (NSA).
From CoreLogic: US Year-Over-Year Home Price Growth Dips Again in July as Higher Mortgage Rates Cool Demand
CoreLogic® ... today released the CoreLogic Home Price Index (HPI™) and HPI Forecast™ for July 2022.
Annual home price growth slowed for the third consecutive month in July but remained elevated at 15.8%. … Notably, home prices declined by 0.3% from June to July, a trend not seen between 2010 and 2019, when price increases averaged 0.5% between those two months, according to CoreLogic’s historic data.
CoreLogic reported in 18.3% YoY increase in June. So, this is a significant slowdown, and CoreLogic noted prices declined from June to July.
Black Knight reported earlier for July: Something Had to Give: Home Prices Down for First Time In 32 Months
The latest data from the Black Knight Home Price Index shows clear signs of an inflection point. For the first time in 32 months, home prices saw a month-over-month dip in July, as growth tipped from deceleration to decline.
Annual home price growth still clocked in at 14.3% – more than three times the long-run average – but most of that appreciation occurred in the last months of 2021 and earlier this year. Such strong annual growth rates can hide underlying weakness. Month-over-month data gives us a much clearer picture of just how much – and how quickly – the housing market has shifted.
The median home price fell by 0.77% in July, the largest single-month drop since January 2011.
And Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close. From Zillow Research: June 2022 Case-Shiller Results & Forecast: Moving Towards Rebalance
Even in markets that are seeing falling prices on a monthly basis, the dips are nowhere near enough to undo the rapid appreciation that occurred since the onset of the pandemic, meaning affordability remains a significant challenge. By the same token, homeowners aren’t at risk of seeing their equity depleting. The rest of the summer and into the fall will bring about more pronounced moves towards a rebalanced market, but the most significant impact would come from a true increase in inventory. But as new construction data from the past few months tells us, meaningful increases in the housing supply look unlikely for the near term.
Annual home price growth as reported by Case-Shiller are expected to slow in all three indices. Monthly appreciation in July is expected to accelerate. S&P Dow Jones Indices is expected to release data for the June S&P CoreLogic Case-Shiller Indices on Tuesday, September 27.
The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be 15.9% in July. This would the lowest year-over-year increase since April 2021. This Case-Shiller National index was up 20.6% YoY in April, 19.9% in May, 18.0% in June, and Zillow is forecasting 15.9% in July. This is a sharp slowdown in YoY price increases.
For the most part, this deceleration was before the most recent rate increases (current 30-year mortgage rates are at 6.25%). Whether this means prices will stall on a national basis or decline something like 5% to 10% remains to be seen. It is clear there will be some double-digit regional declines, but I don’t expect cascading price declines this time since lending standards have been reasonably solid.
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