After five straight months of MoM declines, S&P Case-Shiller reports that home prices in America’s 20 largest cities surged 0.19% MoM (far better than then -0.10% MoM expected)…
Source: Bloomberg
On a YoY basis, price gains slowed to +1.58% (from +1.81%) – the slowest since July 2023 – the seventh straight month of deceleration in overall price gains.
As Bloomberg’s Prashant Gopal notes, the easing of price growth is good news for buyers after a prolonged affordability squeeze caused by soaring prices and high mortgage rates.
“August’s data shows U.S. home prices continuing to slow, with the National Index up just 1.5% year-over-year,” said Nicholas Godec, CFA, CAIA, CIPM, Head of Fixed Income Tradables & Commodities at S&P Dow Jones Indices.
“This marks the weakest annual gain in over two years and falls well below the 3% inflation rate. For the fourth straight month, home values have lost ground to inflation, meaning homeowners are seeing their real wealth decline even as nominal prices inch higher.
The index measures a three-month period ending in August, when mortgage rates were beginning to drop from near 7% and available listings were growing.
Mortgage rates suggest prices will re-accelerate, but:
“Mortgage rates remaining above 6.5% continue to weigh on buyer demand, even during what should be the busy summer season. The combination of high financing costs and prices that remain near record highs has limited transaction activity. Markets that experienced the sharpest pandemic-era gains are now seeing the largest corrections, while more affordable metros with stable local economies are holding up better. Looking ahead, the housing market appears to be finding a new equilibrium after the pandemic boom,” Godec concluded.
“With price growth running at half the rate of inflation and several major markets in decline, the rapid appreciation of recent years has clearly ended. This adjustment may ultimately lead to a more sustainable market, but for now, homeowners are watching their real equity erode while buyers face the dual challenge of elevated prices and high borrowing costs.”
Source: Bloomberg
Among 20 cities, New York again led the S&P Cotality Case-Shiller index, with a 6.1% annual gain in prices. Following were Chicago and Cleveland with increases of 5.9% and 4.7%, respectively.
Prices fell on a YoY basis in 8 cities with Tampa falling 3.3%, the lowest of the 20 cities measured.
“Looking ahead, the housing market appears to be finding a new equilibrium after the pandemic boom,” Nicholas Godec, head of fixed income tradables and commodities at S&P Dow Jones Indices, said in a statement.
“With price growth running at half the rate of inflation and several major markets in decline, the rapid appreciation of recent years has clearly ended.”
However, home-price changes do seem to track very closely with bank reserves at The Fed (6mo lag)…
…which implies home prices could rapidly decelerate in the new year (after a brief rebound).
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