- by New Deal democrat
This morning we got the repeat home sales price data from the FHFA and Case Shiller. And the news was good, especially in the slightly leading FHFA Index.
This is of heightened importance compared with normal historical times. That’s because to reiterate, my focus is looking for any movement towards rebalancing between new and existing home sales. As to existing home sales, this means increasing inventories and more stable or even slightly declining prices, and we did see another increase in inventory earlier this week. In the repeat sales index, I am looking for signs that price increases might be abating.
And abating they are - slowly. On a monthly basis, the FHFA showed prices *declilning* -0.1% in the three month average through June after being unchanged in May. In the Case Shiller national index, which tends to lag by a month or so, prices increased 0.2% during the same period. Outside of late 2022, these are the lowest monthly price changes since the pandemic lockdown months:
On a YoY basis, both indexes are up 5.4%. This is the lowest reading since December in the Case Shiller index, and the lowest since last July in the more leading FHFA index:
For the entire first half of this year, both indexes are up only 2.3%, for a 4.6% annual rate. As you can see from the above graph, that rate would be absolutely typical for an annual increase before the pandemic.
Becase the house price indexes lead the shelter component of the CPI (Owners Equivalent Rent, black in the graph below) by 12-18 months, this also means we can expect continued (if slow) deceleration in that very important component of consumer prices as well:
Specifically Owners Equivalent Rent, which is 25% of the entire CPI, should continue to trend towards 3% YoY increases in the months ahead.
Most people expect the Fed to cut rates by at least 1/4% later this month, and this report should give them a further reason for comfort to do so.