Written by Steven Hansen
The non-seasonally adjusted S and P CoreLogic Case-Shiller home price index (20 cities – although only 19 cities this month) year-over-year rate of home price growth declined from 3.7 % to 3.5 %. The index authors stated, “More data will be required to understand whether the market resumes its previous path of accelerating prices, continues to decelerate, or remains stable”.
Analyst Opinion of Case-Shiller HPI
All home price indices are now showing home price growth is slowing year-over-year. Most of the blame for this should be laid at the feet of the pandemic which has altered daily lives.
- 20 city unadjusted home price rate of growth decelerated by 0.2 % month-over-month. [Econintersect uses the change in year-over-year growth from month-to-month to calculate the change in the rate of growth]
- Note that the Case-Shiller index is an average of the last three months of data.
- The market expected from Econoday:
| Consensus Range | Consensus | Actual | |
| 20-city, SA – M/M | 0.1 % to 0.5 % | +0.1 % | +0.0 % |
| 20-city, NSA – M/M | 0.3 % to 0.6 % | +0.4 % | +0.2 % |
| 20-city, NSA – Yr/Yr | 3.6 % to 4.0 % | +3.9 % | +3.5 % |
S&P/Case-Shiller Home Price Indices Year-over-Year Change
Comparing the NAR and Case-Shiller home price indices, it needs to be understood each of the indices uses a unique methodology in compiling their index – and no index is perfect.
The way to understand the dynamics of home prices is to watch the direction of the rate of change. Here home price growth is now slowing.
There are some differences between the indices on the rate of “recovery” of home prices.
A synopsis of Authors of the Leading Indices:
Case Shiller’s Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices stated:
Housing prices were stable in June. The National Composite Index rose by 4.3% in June 2020, as it had also done in May (June’s growth was slightly lower in the 10- and 20-City Composites, which were up 2.8% and 3.5%, respectively). More data will be required to understand whether the market resumes its previous path of accelerating prices, continues to decelerate, or remains stable. That said, it’s important to bear in mind that deceleration is quite different from an environment in which prices actually fall.
June’s gains were quite broad-based. Prices increased in all 19 cities for which we have data, accelerating in five of them. Phoenix retains the top spot for the 13th consecutive month, with a gain of 9.0% for June. Home prices in Seattle rose by 6.5%, followed by Tampa at 5.9% and Charlotte at 5.7%. As has been the case for the last several months, prices were particularly strong in the Southeast and West, and comparatively weak in the Midwest and (especially) Northeast.
CoreLogic believes home prices will remain firm moving forward (June 2020 Data). Per Dr. Frank Nothaft, chief economist at CoreLogic and Frank Martell, president and CEO of CoreLogic stated:
Mortgage rates hit record lows this spring, which created affordability for home buyers. First-time buyers, and millennials in particular, have jumped at the opportunity to achieve homeownership.
Home price appreciation continues at a torrid pace reflecting fundamental strength in demand drivers and affordability. As we move forward, we expect these price increases to moderate over the next twelve months. Given the economic outlook, housing remains a bright spot for the foreseeable future
From the National Association of Realtors (July 2020 data):
The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic days. With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.
The number of new listings is increasing, but they are quickly taken out of the market from heavy buyer competition. More homes need to be built.
The U.S. Federal Housing Finance Agency produces an All-Transactions House Price Index for the United States:
Econintersect publishes knowledgeable views of the housing market.
Caveats on the Use of Home Price Indices
The housing price decline seen since 2005 varies by zip code – and seems to have ended somewhere around the beginning of the 2Q2012. Every area of the country has differing characteristics. Since January 2006, the housing declines in Charlotte and Denver are well less than 10%, while Las Vegas home prices had declined by almost 60%.
Each home price index uses a different methodology – and this creates slightly different answers.
The most broadly based index is the US Federal Housing Finance Agency’s House Price Index (HPI) – a quarterly broad measure of the movement of single-family house prices. This index is a weighted, repeat-sales index on the same properties in 363 metro centers, compared to the 20 cities Case-Shiller.
The US Federal Housing Finance Agency also has an index (HPIPONM226S) based on 6,000,000 same home sales – a much broader index than Case-Shiller. Also, there is a big difference between home prices and owner’s equity (OEHRENWBSHNO) which has been included in the graph below.
Comparing Various Home Price Indices to Owner’s Equity (blue line)
The affordability factor favors rental vs owning.
Price to Rent Ratio – Indexed on January 2000 – Based on Case-Shiller 20 cities index ratio to CPI Rent Index
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