S&P Dow Jones Indices released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released for March 2019 shows that the rate of home price increases across the U.S. has continued to slow.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 3.7% annual gain in March, down from 3.9% in the previous month. The 10-City Composite annual increase came in at 2.3%, down from 2.5% in the previous month. The 20-City Composite posted a 2.7% year-over-year gain, down from 3.0% in the previous month.
Las Vegas, Phoenix and Tampa reported the highest year-over-year gains among the 20 cities. In March, Las Vegas led the way with an 8.2% year-over-year price increase, followed by Phoenix with a 6.1% increase, and Tampa with a 5.3% increase. Four of the 20 cities reported greater price increases in the year ending March 2019 versus the year ending February 2019.
“Home price gains continue to slow,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.
“The patterns seen in the last year or more continue: year-over-year price gains in most cities are consistently shrinking. Double-digit annual gains have vanished. The largest annual gain was 8.2% in Las Vegas; one year ago, Seattle had a 13% gain. In this report, Seattle prices are up only 1.6%. The 20-City Composite dropped from 6.7% to 2.7% annual gains over the last year as well. The shift to smaller price increases is broad-based and not limited to one or two cities where large price increases collapsed. Other housing statistics tell a similar story. Existing single family home sales are flat. Since 2017, peak sales were in February 2018 at 5.1 million at annual rates; the weakest were 4.36 million in January 2019. The range was 650,000.
“Given the broader economic picture, housing should be doing better. Mortgage rates are at 4% for a 30-year fixed rate loan, unemployment is close to a 50-year low, low inflation and moderate increases in real incomes would be expected to support a strong housing market. Measures of household debt service do not reveal any problems and consumer sentiment surveys are upbeat. The difficulty facing housing may be too-high price increases. At the currently lower pace of home price increases, prices are rising almost twice as fast as inflation: in the last 12 months, the S&P Corelogic Case-Shiller National Index is up 3.7%, double the 1.9% inflation rate. Measured in real, inflation-adjusted terms, home prices today are rising at a 1.8% annual rate. This compares to a 1.2% real annual price increases in housing since 1975.”
One other point to note, after the 2007 financial crisis, home prices continued to fall for a further three years. A salutatory warning to those in Australia who think prices are about to rebound! In fact it took more than a decade for prices to return to their 2007 levels.
