US home price gains accelerated in September, according to updates on two key national gauges released Tuesday.
The S&P CoreLogic Case-Shiller 20-City Index rose 3.9% YoY as summer melted into autumn. That was in line with estimates. The national gauge posted a similar gain.
The 0.3% MoM increase on the national index was the eighth consecutive. Prices bottomed in January. They’re up almost 7% since then.
“We’ve commented before on the breadth of the housing market’s strength, which continued to be impressive,” Craig Lazzara, Managing Director at S&P DJI, said.
All cities in the 20-city gauge posted price increases on a seasonally adjusted basis in September. The 10-City Composite (and 10 individual cities besides) sits at a record.
As a reminder, the national gauge reclaimed all-time highs some months ago.
I assume this is obvious, but just in case: These are comprehensive indexes. While you can glean something ostensibly useful about builder concessions and trends in new construction (e.g., towards more modest homes and smaller lot sizes, as one reader noted) from the government’s new home sales series, the 18% YoY price decline for October reflected in Monday’s new construction data isn’t representative. Existing home prices are still propped up by an acute dearth of supply.
If your next question is whether that means finance-focused social media’s committed deflation pundits were being deliberately disingenuous earlier this week to present the record decline in new home prices as definitive evidence of imminent disinflation, the answer is “yes, of course.” Pretty much everyone you come across every day is being deliberately disingenuous about something or other. (Remember that as you go about your daily life.)
That doesn’t mean home prices in the US won’t eventually succumb to a correction once rates are lower and homeowners start listing their properties again. But the notion that October’s anomalous plunge in new home prices suggests Americans can expect overall median home prices to deflate 20% across the board is completely unrealistic, at least for now.
That said, I’ll be the first to concede that it’s very hard to know what the “true” price of existing properties is given the supply-demand mismatch. I’m a bit of a real estate addict these days, and I gotta tell you, the wide gap between listing prices for some existing properties and what I’d call “reality” suggests sellers (and their agents) are very keen to exploit current market dynamics before the situation normalizes. Simply put: Every all-brick, four-bedroom in the suburbs isn’t worth $1.2 million. If a recession (or lower rates unlocking supply) doesn’t drag pie-in-the-sky prices for some existing properties lower, better deals on new construction will. But that’s all going to take some time.
Anyway, FHFA prices, released concurrently with the Case-Shiller update, showed a 6.1% YoY gain for September. Every region with the exception of the Pacific posted a MoM increase. From Q3 2022 to Q3 2023, prices rose 5.5%, quarterly figures accompanying the monthly data revealed.
“US house price growth continued to accelerate in the third quarter, appreciating more than in each of the previous four quarters,” Anju Vajja, Principal Associate Director in FHFA’s Division of Research and Statistics said Tuesday. “House prices rose in the third quarter in all census divisions and are higher than one year ago, driven primarily by a low supply of homes for sale.”
My brick, four-bedroom is actually worth 1.2 MM though…
Everybody’s a millionaire! It says so right there on the “Zestimate”
A couple of good reads out there on this subject. The Atlantic has one about how it won’t be a good time to buy a home until 2030, and that is supported by the Washington Post’s data dive on where homes are actually being built and at what pace.
If the Fed is trying to tackle inflation, and shelter inflation is a piece of that, it seems the reality is the 3 sides are at an impasse right now. Buyers who own homes aren’t selling to buy at a higher rate, sellers aren’t willing to pay current asking prices with rates being high, and the Fed can’t lower rates until home prices normalize. Builders are building but not even close to enough to meet the demand.
My morbid conclusion is that everyone is waiting for the boomers to exit the market and cede the current inventory to smaller generations where there won’t be a dramatic undersupply issue. 2030 probably makes sense in that context.