Case Shiller Home Prices Index Continues Slower Year-Year Gains

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Case Shiller CoreLogic indices ROSE in March for the second straight month;
  • The indices also ROSE year-year but at more slowly than in February;
  • The price index rose in 19 of the 20 cities surveyed in March compared with February when 15 cities showed month-month increases;
  • The March increases were slower than February in four cities;
  • Year-year the price index rose in 15 of the 20 cities surveyed but the year-year increase was slower in 16 of the 20 cities

Trends:

  • The price index rose in all four census regions led by 0.7 percent increases in the Northeast and Midwest;
  • The price index rose for the 15th straight month in Miami;
  • The price index rose in Minneapolis after dropping for six consecutive months.

Data Source: S&P Case Shiller/Core Logic

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Home values rose for the second straight month in March, according to the Case Shiller Core-Logic Home Price Index but the year-year growth in values continued to slow.

As with most reports on home prices, there are immediate winners and losers.

In this case, the Case Shiller report worked to the benefit of potential buyers but as prices climb more slowly, sellers and potential sellers had new incentive to take homes off the market reducing choice for buyers.

There’s a lot of psychology – and game theory – in the home sales market: as prices rise empty-nesters and other potential sellers reconsider decisions to keep homes off the market as buyers act with greater resolve fearing that prices might rise faster as they dither. On the flip side, when prices fall, buyers become more aggressive and sellers might settle for lower prices fearing further price drops or pull their homes off the market entirely.

The implications of decisions on both sides of the transaction are long term.

Empty-nesters sand retirees who had been counting on the appreciation of their homes to fund a more comfortable retirement may reconsider retirement decisions clogging the workforce and making it more difficult for newly minted college grads and other entrants to the workforce to find jobs with a ripple effect on retail activity.

While economists watch the month-month gyrations in housing prices. They generally concentrate more on year-year changes since monthly data can be influenced by the choice of homes bought and sold. A five-bedroom home will carry a higher price tag than a three-bedroom home. Those differences are usually smoother over time which leads to a year-year price comparison.

While prices continue to rise year-year, according to Case Shiller data, the rate of change (ah calculus) is slowing and has been for almost a year.

Last year, for example, the Case Shiller national home price index showed prices were up 6.5 percent from the previous year; in March, the year-year price increase was 3.7 percent.  The pattern Is similar in the 10-city and 20-city home price indices. In March 2018, the 10-city index was up 6.4 percent from March 2017 and the 20-city index was up 6.7 percent. This month’s report showed the 10-city index up 2.3 percent and the 20-city index rose 2.7 percent in the last year.

Overall snapped out of their doldrums in February, improving for the first time since late last year, but the positive movement doesn’t mean housing woes are gone.

Indeed, housing has been feeling the pinch since President Trump signed his tax changes in December 2017, reducing the tax advantages of home ownership by capping the amount of mortgage interest and local real estate taxes which can be deducted from taxable income.

Since the law took effect, home prices, according to the Case-Shiller Corel Logic home price index, have risen 5.2 percent; in the previous 16 months, prices rose 6.5 percent.

The National Association of Realtors reported the median price of an existing single-family home rose 3.8 percent in March or $9,600; year-year the median price grew 4.0 percent. According to the Census Bureau and Department of Housing and Urban Development, the median price of a new home fell 3.3 percent or $10.300 to $305,800 in March. The median price though was down $29,600 or 8.8 percent from March 2018 a sharper drop than the 3.4 percent decline from February 2018 to February 2019.

In the latest Case Shiller report, month-month prices increases were led by San Francisco, up 2.1 percent, followed by Boston and Seattle, up 1.6 percent each. The only city to show a drop in prices was New York where prices fell 0.1 percent. Year-year price increases were led by Las Vegas where prices rose 8.2 percent in March 2019 over March 2019; The year-year price increase in Las Vegas was 9.7 percent from February 2018 to February 2019.

Hear Mark Lieberman this Friday on P.O.T.U.S. radio’s Morning Briefing, Sirius-XM 124, at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

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