In Red-Hot US Housing Market, 19% Surge Counts As ‘Cool’

The rate of appreciation in US home prices is slowing. Albeit only slightly.

I’m not convinced of the utility in dedicating separate coverage to every incremental update on a housing market that’s still too hot to safely handle, but it’s notable that the inevitable leveling off in the pace of gains is upon us.

The YoY increase on the Case-Shiller 20-City gauge was 18.4% for October, data out Tuesday showed. That was a touch lower than estimates, and represented a third straight month of cooling price pressures (figure below).

As a reminder, the annual gain exceeded 20% in July.

The YoY reading on the national index was 19.08%. That was the coolest since June, although “cool” is an extremely relative term in this context.

“In October, US home prices moved substantially higher, but at a decelerating rate,” Craig Lazzara, Managing Director at S&P DJI, said, in a press release. On all three gauges (i.e., the national composite, the 20-city and the 10-city) October’s gains “were below September’s, and September’s gains were below August’s,” Lazzara added, before flatly noting that October’s gain on the national index was still the fourth-highest reading in series history.

The figures come on the heels of data showing the median price of new homes in the US reached $417,000 in November, up nearly a third since the eve of the pandemic. The latest existing home sales figures from the NAR showed median prices rose almost 14% YoY last month, to $353,900.

Importantly from a macro perspective (and from a policy standpoint), the lagged effect of these meteoric increases is beginning to show up in official inflation data. The figure (below) is updated with Tuesday’s Case-Shiller numbers.

The highlights show you the delayed effect. Plainly, there’s scope for shelter costs to exert additional upward pressure on inflation going forward.

“We have long expected a sharp acceleration in shelter inflation, which we now see reaching a peak of 5.5% YoY in late 2022,” Goldman wrote, in a note published the day after Christmas.

But who needs shelter, anyway? And besides, I hear the nation’s tent cities are “pretty substantial” these days.