- by New Deal democrat
Last week the existing home sales report showed continued deceleration in YoY price increases to 1.8%, indicative of the ongoing rebalancing of the housing market. This morning’s repeat home sales reports from the FHFA and S&P Case Shiller confirmed that deceleration and ongoing rebalancing.
On a seasonally adjusted basis, in the three month average through March, the Case-Shiller national index (light blue in the graphs below), showed a declne of -0.3%, and the somewhat more leading FHFA purchase only index (dark blue) declined -0.1%. These monthly changes were the lowest since late 2022 [Note: FRED hasn’t updated the FHFA data yet]:
On a YoY basis, price gains in both indexes also showed continued deceleration, as the Case Shiller index declined -0.5% YoY to a 3.4% gain, and the FHFA index declined by -0.4% YoY to a 3.5% YoY increase:
Because house prices lead the measure of shelter inflation in the CPI, specifically Owners Equivalent Rent by 12-18 months, the above graph also shows that measure of shelter inflation (red, *2.5 for scale). The FHFA and Case Shiller reports this month adds to the evidence that OER will trend gradually towards roughly a 3.5% - or even 3.0% - YoY increase in the months ahead. Indeed, the last time the Case-Shiller and FHFA Indexes were in this range YoY (2019) (not shown), Owners Equivalent rent gradually declined in the 12-24 months thereafter to the +2% YoY level (5% in 2021 as shown in graph)
Last month I noted that the most leading rent index, the Fed’s experimental all new rental index (not shown), showed a median YoY *decrease* in new apartment rents of -2.2% YoY, with all rents including existing rentals increasing at a rate of +3.3% YoY in Q1. So this morning’s repeat home sales price reports were in line with that good report as well.
The only bad news is that as a result Tariff-palooza!!, interest rates including mortgage rates have moved higher:
In fact on Friday, the daily update showed mortgage rates back slightly over 7%. Which suggests that part of the ongoing deceleration in home price increases is likely to be demand destruction.
