Case-Shiller Home Prices: Approaching a Balanced Market—but There's a Big If

In a 15-month trend, annual appreciation decelerated to 3.1 percent in June, falling from 3.3 percent in May, according to the national S&P CoreLogic/Case-Shiller Indices, released today.

The declining gains indicate a return to sustainability, explains Philip Murphy, managing director and global head of Index Governance at S&P Dow Jones Indices.

“Home price gains continue to trend down, but may be leveling off to a sustainable level,” Murphy says. “The U.S. National Home Price NSA Index year-over-year price change in June 2019 of 3.1 percent is exactly half of what it was in June 2018.”

A determining factor, however, is the potential recession, which could disrupt the longer-term trend—but, experts have mixed views.

“Home price gains in most cities remain positive in low single digits,” Murphy says. “Therefore, it is likely that current rates of change will generally be sustained barring an economic downturn.”

According to Ralph McLaughlin, CoreLogic deputy chief economist and executive of Research and Insights, there is the potential for prices to reignite, especially if low mortgage rates remain the trend. The average 30-year fixed rate slid to 3.55 percent, down from 4.51 percent this time in 2018, Freddie Mac recently reported.

“While falling mortgage rates have thus far only led to an increase in refinancing, rather than purchase activity, there will undoubtedly be a large boon to the marginal homebuyer,” McLaughlin says. “Thus, we should expect the lengthy slowdown in home price growth to flatten or even tick upwards by the end of the year, assuming the U.S. economy avoids any present-day threats of a recession.”

According to Lawrence Yun, chief economist at the National Association of REALTORS®, there is a high likelihood for prices to strengthen. In July, the existing-home median price was $280,800, an increase of 4.3 percent year-over-year.

“Though showing mild deceleration in price growth, it is worth noting that this index is a bit of a lagging indicator, with the latest data reflecting what happened in April, May and June,” says Yun. “The figure is likely to show reacceleration in home price gains in the upcoming months, as the market has been shifting towards higher demand due to lower mortgage rates and reduced supply as home builders constructed fewer homes this year compared to the last year.”

In the country’s 20 major markets, home prices rose 2.1 percent year-over-year, according to the S&P National Index. The biggest gains in June were in Phoenix, where home prices surged 5.8 percent, and in Las Vegas, at 5.5 percent.

The complete data for the 20 markets measured by S&P:

Atlanta, Ga.
May/June: 0.5%
Year-Over-Year: 4.5%

Boston, Mass.
May/June: 1.1%
Year-Over-Year: 3.9%

Charlotte, N.C.
May/June: 0.6%
Year-Over-Year: 4.5%

Chicago, Ill.
May/June: 0.7%
Year-Over-Year: 1.5%

Cleveland, Ohio
May/June: 0.8%
Year-Over-Year: 3.4%

Dallas, Texas
May/June: 0.4%
Year-Over-Year: 2.7%

Denver, Colo.
May/June: 0.4%
Year-Over-Year: 3.4%

Detroit, Mich.
May/June: 1.2%
Year-Over-Year: 4.2%

Las Vegas, Nev.
May/June: 0.5%
Year-Over-Year: 5.5%

Los Angeles, Calif.
May/June: 0.2%
Year-Over-Year: 1.6%

Miami, Fla.
May/June: 0.1%
Year-Over-Year: 2.8%