CALCULATEDRISK
“Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index … rose 4.6 percent from July 2022 to July 2023. “
By Bill McBride
S&P/Case-Shiller released the monthly Home Price Indices for July (“July” is a 3-month average of May, June and July closing prices). July closing prices include some contracts signed in March, 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 0.65%. This was the sixth consecutive MoM increase following seven straight MoM decreases.
On a seasonally adjusted basis, prices increased in all of the 20 Case-Shiller cities on a month-to-month basis. Seasonally adjusted, San Francisco has fallen 9.7% from the recent peak, Seattle is down 8.8% from the peak, Las Vegas is down 8.3%, and Phoenix is down 7.6%.
FHFA House Price Index
On the FHFA index: FHFA House Price Index Up 0.8 Percent in July; Up 4.6 Percent from Last Year
U.S. house prices rose in July, up 0.8 percent from June, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI®). House prices rose 4.6 percent from July 2022 to July 2023. The previously reported 0.3 percent price increase in June was revised upward to a 0.4 percent increase. …
“U.S. house prices continued to appreciate in July, consistent with the trend observed over the last several months.” said Dr. Nataliya Polkovnichenko, Supervisory Economist in FHFA’s Division of Research and Statistics. “Regionally, all nine census divisions posted positive price appreciation over the last 12 months, although the Pacific and Mountain divisions experienced only modest growth.”
emphasis added
The monthly index increased 0.8% in July. Here is a graph from the FHFA report showing the annual change by region for July 2023 compared to July 2022. Prices have increased year-over-year everywhere, but only slightly in the Pacific and Mountain regions. Note that the YoY increase is smaller this year, compared to the YoY increase in July 2022 in all of the nine regions.
Case-Shiller House Prices
From S&P S&P CoreLogic Case-Shiller Index Continues to Trend Upward in July
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported 1.0% annual change in July, up from a 0% change in the previous month. The 10- City Composite showed an increase of 0.9%, which improves from a -0.5% loss in the previous month. The 20-City Composite posted a year-over-year increase of 0.1%, improving from a loss of -1.2% in the previous month.
…
Before seasonal adjustment, the U.S. National Index, 10-City and 20-City Composites, all posted a 0.6% month-over-month increase in July.
After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 0.6%, while the 10-City posted a 0.8% increase and 20-City Composite a 0.9% increase.
“U.S. home prices continued to rally in July 2023,” says Craig J. Lazzara, Managing Director at S&P DJI. “Our National Composite rose by 0.6% in July, and now stands 1.0% above its year-ago level. Our 10- and 20-City Composites each also rose in July 2023, and likewise stand slightly above their July 2022 levels.
“We have previously noted that home prices peaked in June 2022 and fell through January of 2023, declining by 5.0% in those seven months. The increase in prices that began in January has now erased the earlier decline, so that July represents a new all-time high for the National Composite. Moreover, this recovery in home prices is broadly based. As was the case last month, 10 of the 20 cities in our sample have reached all-time high levels. In July, prices rose in all 20 cities after seasonal adjustment (and in 19 of them before adjustment).
“That said, regional differences continue to be striking. On a year-over-year basis, the Revenge of the Rust Belt continues. The three best-performing metropolitan areas in July were Chicago (+4.4%), Cleveland (+4.0%), and New York (+3.8%), repeating the ranking we saw in May and June. The bottom of the leader board reshuffled somewhat, with Las Vegas (-7.2%) and Phoenix (-6.6%) this month’s worst 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 0.8 in July (SA) and is at a new all-time high. The Composite 20 index is up 0.9% (SA) in July and is also at a new all-time high. The National index is up 0.6% (SA) in July and is also at a new all-time high.
The Composite 10 SA is up 0.9% year-over-year. The Composite 20 SA is up 0.1% year-over-year. The National index SA is up 1.0% 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 July 2023). Note that the months-of-supply is not seasonally adjusted.
The last 15 months are in black showing a possible shift in the relationship, and prices fell for seven months with low levels of inventory! The last few months are following the historic pattern.
In July, the months-of-supply was at 3.3 months, and the Case-Shiller National Index (SA) increased 0.65% month-over-month. Historically prices haven’t declined until inventory reached 6 months of supply.
In the July existing home sales report, the NAR reported months-of-supply was also at 3.3 months.
The year-over-year Case-Shiller price changes were close to expectations.
Here are the 30-year mortgage rates according to the Freddie Mac PMMS:
The July report was mostly for contracts signed in the March through June period and was likely boosted by somewhat lower rates in the first half of 2023.
The increase in mortgage rates to over 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 up 3.9% year-over-year in August, and, as expected, the Case-Shiller National Index was up year-over-year in the July report – and will likely be up further year-over-year in the August report.
A key question is “Will prices decline further later this year?” with higher mortgage rates and more inventory. I’ll update some price projections soon.