CALCULATERISK

FHFA: House Prices Increased 0.1% in March, up 6.6% YoY

By Bill McBride

S&P/Case-Shiller released the monthly Home Price Indices for March (“March” is a 3-month average of January, February and March closing prices). March closing prices include some contracts signed in November, 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 (SA) Case-Shiller National Index was at 0.30%. This was the fourteenth consecutive MoM increase, but a smaller MoM increase than the previous two months.

On a seasonally adjusted basis, prices increased month-to-month in 15 of the 20 Case-Shiller cities. Seasonally adjusted, San Francisco has fallen 8.2% from the recent peak, Seattle is down 6.0% from the peak, Portland down 4.0%, and Phoenix is down 3.1%.

FHFA House Price Index

On the FHFA index: U.S. House Prices Rise 6.6 Percent over the Last Year; Up 1.1 Percent from the Fourth Quarter of 2023

U.S. house prices rose 6.6 percent between the first quarter of 2023 and the first quarter of 2024, according to the Federal Housing Finance Agency (FHFA) House Price Index (FHFA HPI®). House prices were up 1.1 percent compared to the fourth quarter of 2023. FHFA’s seasonally adjusted monthly index for March was up 0.1 percent from February.

“U.S. house prices continued to grow at a steady pace in the first quarter,” said Dr. Anju Vajja, Deputy Director for FHFA’s Division of Research and Statistics. “Over the last six consecutive quarters, the low inventory of homes for sale continued to contribute to house price appreciation despite mortgage rates that hovered around 7 percent.” emphasis added

The seasonally adjusted monthly index increased 0.1% in March. Here is a graph from the FHFA report showing the annual change by region for March 2024 compared to March 2023. Prices have increased year-over-year everywhere. Note that the YoY increase is larger this year, compared to the YoY increase in February 2023 in seven of the nine regions.

The increase this year is smaller in the West South Central and East South Central regions.

Case-Shiller House Prices

From S&P:  S&P CoreLogic Case-Shiller Index Hits New All-Time High in March 2024

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 6.5% annual gain for March, the same increase as the previous month. The 10- City Composite saw an increase of 8.2%, up from a 8.1% increase in the previous month. The 20-City Composite posted a slight year-over-year increase to 7.4%, up from a 7.3% increase in the previous month. San Diego continued to report the highest year-over-year gain among the 20 cities this month with an 11.1% increase in March, followed by New York and Cleveland, with increases of 9.2% and 8.8%, respectively. Portland, which still holds the lowest rank after reporting three consecutive months of the smallest year-over-year growth, posted the same 2.2% annual increase in March as the previous month.
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The U.S. National Index, the 20-City Composite, and the 10-City Composite all continued their upward trend from last month, showing pre-seasonality adjustment increases of 1.3%, 1.6% and 1.6%, respectively.

After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 0. 3%, while the 20-City and the 10-City Composite both reported month-over-month increases of 0.3% and 0.5%, respectively.

“This month’s report boasts another all-time high,” says Brian D. Luke, Head of Commodities, Real & Digital Assets at S&P Dow Jones Indices. “We’ve witnessed records repeatedly break in both stock and housing markets over the past year. Our National Index has reached new highs in six of the last 12 months. During that time, we’ve seen record stock market performance, with the S&P 500 hitting fresh all-time highs for 35 trading days in the past year.

“San Diego stands out with an impressive 11.1% annual gain, followed closely by New York, Cleveland, and Los Angeles, indicating a strong demand for urban markets.”
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 was up 0.5% in March (SA). The Composite 20 index was up 0.3% (SA) in March. The National index was up 0.3% (SA) in March.

The Composite 10 SA was up 8.2% year-over-year (up from 8.1% YoY in February). The Composite 20 SA was up 7.4% year-over-year (up from 7.3% YoY). The National index SA was up 6.5% year-over-year (unchanged from 6.5% YoY in February).

And a few things to watch …

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 March 2024). Note that the months-of-supply is not seasonally adjusted.

The recent months are in black (March 2024 in Blue) showing that prices fell for seven months with low levels of inventory in 2022!

In March, the months-of-supply was at 3.2 months, and the Case-Shiller National Index (SA) increased 0.30% month-over-month.  Historically prices haven’t declined until inventory reached 6 months of supply. The last several months are mostly following the historic pattern, but it is possible we will see price declines with lower than 6 months of supply.

In the April existing home sales report, the NAR reported months-of-supply increased to 3.5 months (the usual seasonal decline). It is possible that months-of-supply will be back to 2019 levels soon. Months-of-supply will likely be below 2019 levels for the next several months, but this will be something to watch. Note that months-of-supply peaked at 4.3 months in 2019 – and inventory is key for prices. Year-over-year price growth will likely slow as months-of-supply increases.

Mortgage Rates

Here are the 30-year mortgage rates according to the Freddie Mac PMMS:

The March Case-Shiller report was mostly for contracts signed in the November through February period. Current mortgage rates are over 7%, so there might be a negative impact from higher rates in the coming months.

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 5.6% year-over-year in April, up from 4.7% YoY in March, and the Case-Shiller National Index was up 6.5% year-over-year in the March report.

Inventory will be the key metric to watch for house prices and I expect the YoY change in the Case-Shiller index to slow!