S And P CoreLogic Case-Shiller 20 City Home Price Index October 2018 Year-Over-Year Growth Slowed

The non-seasonally adjusted S and P CoreLogic Case-Shiller home price index (20 cities) year-over-year rate of home price growth decelerated from 5.2 % (initially published as 5.1 %) to 5.0 %. The index authors stated "The combination of higher mortgage rates and higher home prices rising faster than incomes and wages means fewer people can afford to buy a house".

Analyst Opinion of Case-Shiller HPI

I continue to see this a situation of supply and demand. It is the affordability of the homes which is becoming an issue for the lower segments of consumers. With the rise in mortgage rates, it is pricing more and more consumers out of the market. If mortgage rates continue to rise - we likely will see some retrenchment in home prices.

  • 20 city unadjusted home price rate of growth decelerated 0.1 % month-over-month. [Econintersect uses the change in year-over-year growth from month-to-month to calculate the change in the rate of growth]
  • Note that the Case-Shiller index is an average of the last three months of data.
  • The market expected from Econoday:

S&P/Case-Shiller Home Price Indices Year-over-Year Change

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Comparing the NAR and Case-Shiller home price indices, it needs to be understood each of the indices uses a unique methodology in compiling their index - and no index is perfect.

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The way to understand the dynamics of home prices is to watch the direction of the rate of change. Here home price growth generally appears to be stabilized (rate of growth not rising or falling).

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There are some differences between the indices on the rate of "recovery" of home prices.

A synopsis of Authors of the Leading Indices:

Case Shiller's David M. Blitzer, Chairman of the Index Committee at S&P Indices:

Home prices in most parts of the U.S. rose in October from September and from a year earlier. The combination of higher mortgage rates and higher home prices rising faster than incomes and wages means fewer people can afford to buy a house. Fixed rate 30-year mortgages are currently 4.75%, up from 4% one year earlier. Home prices are up 54%, or 40% excluding inflation, since they bottomed in 2012. Reduced affordability is slowing sales of both new and existing single family homes. Sales peaked in November 2017 and have drifted down since then.

The largest gains were seen in Las Vegas where home prices rose 12.8% in the last 12 months, compared to an average of 5.3% across the other 19 cities. This is a marked change from the housing collapse in 2006-12 when Las Vegas was the hardest hit city with prices down 62%. After the last recession, Las Vegas diversified its economy by adding a medical school, becoming a regional center for health care, and attracting high technology employers. Employment is increasing 3% annually, twice as fast as the national rate.

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