Slower home price growth continues to outpace inflation

Two major home price indices show that home price increases are still well above historical averages. However, increases in the S&P CoreLogic Case-Shiller indices and the Federal Housing Finance Agency (FHFA) Housing Price Index (HMI) were all slightly smaller than the previous month.

The Case-Shiller National Home Price Index, which covers all nine U.S. census tracts, reported a In June, the annual increase was 5.4 percent, compared to the 5.9 percent increase in May. The 10-City Composite rose 7.4 percent, compared to an annual increase of 7.8 percent in the previous month. The 20-City Composite rose 6.5 percent, falling from the previous +6.9 percent. New York reported annual growth of 9.0 percent, the highest among the 20 cities, followed by San Diego and Las Vegas with annual increases of 8.7 percent and 8.5 percent, respectively. Portland again ranked lowest in annual growth at 0.8 percent.

The upward trend in the US National Index, the 20-City Composite and the 10-City Composite continued to slow from last month. Their preseasonally adjusted increases were 0.5 percent, 0.6 percent and 0.6 percent, respectively. The seasonally adjusted changes were 0.2 percent for the National Index and 0.4 percent and 0.5 percent for the 20-City and 10-City Composite, respectively.

“The S&P CoreLogic Case-Shiller indexes continue to show above-average real price performance when accounting for inflation,” said Brian D. Luke, CFA, head of commodities, real and digital assets. “Housing prices and inflation continue to play a role in the political agenda ahead of the election season. Although both the housing market and inflation have slowed, the gap between the two is wider than has been typical in the past. Our national index is averaging 2.8 percent above the consumer price index. That's a full percentage point above the average over the past 50 years. Without taking inflation into account, home prices have increased by over 1,100 percent since 1974, but after taking inflation into account, they have more than doubled (111 percent).

“Another popular topic is Making housing more affordable for first-time buyers. We compared all 16 markets that calculate the S&P CoreLogic Case-Shiller home price indices on a tiered basis to evaluate the historical performance of more affordable homes. Our tiered indices break each market down into three price ranges that vary by market. “Looking at the past five years, 75 percent of the markets covered show the low-end price ranges rising faster than the overall market,” Luke said. “For example, the lower-end of the Atlanta market has risen 18 percent faster than mid- and higher-end homes. The lower-end in New York has the largest five-year outperformance, rising nearly 20 percent over the entire New York region. New York also has the largest divergence between low- and high-end prices. High-end homes in New York have lagged the region's market by 5.1 percent. Conversely, San Diego has seen the largest increase in value in higher-end homes over the past five years. While the overall San Diego market has grown 72 percent over the past five years, the upper price ranges have done even better, growing 79 percent versus 63 percent in the lower price range.”

The FHFA HMI was largely consistent with the Case-Shiller numbers. The quarterly HMI report showed that U.S. home prices rose 5.7 percent between the second quarter of 2023 and the second quarter of 2024. From the first quarter of this year to the second quarter, prices rose 0.9 percent. The FHFA's seasonally adjusted monthly index for June fell 0.1 percent from May.

“U.S. home prices experienced a third consecutive decline in quarterly growth,” said Dr. Anju Vajja, deputy director of the FHFA's Research and Statistics Division. “The slower pace of appreciation through the end of June was likely due to a higher supply of homes for sale and increased mortgage rates.”

Other important quarterly results:

Nationally, the U.S. housing market has experienced positive annual appreciation in every quarter since the beginning of 2012. Between the second quarter of 2023 and the second quarter of 2024, home prices increased in 50 states and the District of Columbia.

The five states with the highest annual increases in value were Vermont (13.4 percent), West Virginia (12.3 percent), Rhode Island (10.1 percent), Delaware (10.0 percent) and New Jersey (9.9 percent). In 96 of the 100 largest metropolitan areas, real estate prices increased over the last four quarters.

All nine census tracts saw positive changes in real estate prices compared to the previous year. The Middle Atlantic division saw the strongest increase in value, recording an increase of 8.5 percent from the second quarter of 2023 to the second quarter of 2024. The West South Central division saw the smallest increase in value over four quarters, at 2.8 percent.

Case-Shiller indexes track the matching Rice pairs for thousands of individual homes. Each index was benchmarked at 100 in January 2000. The current value of the National Index is 325.23 and the 10- and 20-City Composites are 352.91 and 335.45, respectively.

The FHFA's HPI is based on home sales financed by either Fannie Mae or Freddie Mac. The benchmark value was 100 in January 1991 and is currently 424.5.