The S&P CoreLogic Case-Shiller 20-city index declined and saw the slowest pace of annual growth in January since 2012. Home prices rose 4.3% nationwide.
Key Takeaways
- The Case Shiller Index, a measurement of housing prices, rose 4.3% in January, down from 4.6% the month before.
- Market expectations were for a 4.2% increase in prices throughout the 20-city index.
- The current rate of growth is the slowest advancement since April 2015.
The Case-Shiller Index has been relatively stable amid otherwise volatile housing data over the course of the last year. After years of what proved to be unsustainable growth, home prices are finally coming back to earth.
Land and labor shortages, higher cost of trade-war era building materials, and multiple interest rate hikes all contributed to a tight inventory and steady increases in the price of housing.
However, with mortgage rates hitting a yearly low last week following months of lower rates, affordability has been increasing lately. Wage gains recently started to outpace the housing price increases as sellers began to acknowledge that prices were above market demand. More cities in the 20-city Case Shiller Index saw decline in prices rather than gains for January.
Case-Shiller: National House Price Index increased 4.3% year-over-year in Januaryhttps://t.co/Tys8MbomtZ pic.twitter.com/vtNYNtZeOB
— Bill McBride (@calculatedrisk) March 26, 2019
Regional Home Prices
West Coast cities like San Diego and San Francisco saw the some of the slowest annual gains in January. San Francisco saw a -1.3% drop in prices in January with a 1.8% increase overall. San Diego saw the lowest annual gain in the index at 1.8% and a -0.2% price drop in January. Chicago prices dropped -0.5% in January and saw a mere 2.4% increase annually. Cleveland saw the biggest monthly drop at -0.6% with a 3.8% annual gain.
Home prices are still rising, but at a reduced pace due to fewer buyers being able to afford the current inventory. The 10-city composite rose 3.2% compared to 3.7% in December, and the 20-city composite gained 3.6% annually, down from 4.1% in December.
Seattle saw annual gains dip from 12.8% to 4.1% in January, while San Francisco prices dropped 10.2% annually. The biggest annual gains were seen in Las Vegas, Phoenix, and Minneapolis.
The January prices in the Case-Shiller Index reflect sales closed for the three months ending with January during which time mortgage rates were still high and impacting affordability.
Expert Outlook
“The last time it advanced this slowly was April 2015. In 16 of the 20 cities tracked, price gains were smaller in January 2019 than in January 2018,” said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “Only Phoenix saw any appreciable acceleration. Some cities where prices surged in 2017-2018 now face much smaller increases.”
“Since then, rates have dropped to 4.28 percent as of mid-March. Sales of existing single-family homes slid gently downward from the 2017 fourth quarter until January of this year before jumping higher in February 2019,” Blitzer said. “It remains to be seen if recent low mortgage rates and smaller price gains can sustain improved home sales.”
Market Reaction
Gold prices are down today amid profit taking following a four-week high seen yesterday. The pullback is considered normal with many traders exiting positions in order to cash out, triggering a sell-off. Gold has ticked upward following the release of the Case-Shiller data, but remains down -0.30% at $1,317.94 with a high of $1,324.37/oz and a low of $1,312.86/oz. June futures last traded down -0.34% at $1,324.50/oz.