- by New Deal democrat
For the last number of months, I have been putting front and center that housing prices have ceased being an engine of inflation. In fact, changes in repeat home sales prices as measured by both the Case-Shiller National Index and the FHFA Purchase Only Index are at levels that with only one exception have been at levels typically only seen during or after recessions.
This month’s report for March continued that trend.
The seasonally adjusted Case-Shiller National index (blue in the graphs below) actually declined -0.2% for the three month period ending in March, while the FHFA index (red) rose 0.1%:
Just as important if not moreso is that the YoY comparisons of at least one of the two national indexes continued to show further disinflation. The Case Shiller national index increased only 0.7% YoY, tied for the lowest since the Great Recession’s housing bust except for April through June 2023. The FHFA Index again rounded to 1.7%, as it has for the last two months, but actually was slightly lower, becoming the lowest such reading since 2012:
As per usual, since housing prices lead the CPI’s shelter component (purple in the graph below) by roughly 12-18 months, let’s compare the YoY trends (Note: house price indexes /2.5 for scale) going all the way back to 1990:
In 1992, with house price increases generally stable in the roughly 0.5%-1.0% YoY range, shelter inflation increased about 3.0%. But in the past year the trend in house prices has been continued slow disinflation, as it was in 1991. Thus I continue to believe that the repeat sales indexes provide solid evidence that we can expect shelter inflation in the CPI to continue to decelerate throughout this year, with the shelter component ending this year at close to a 2.0% YoY increase.
In April, the shelter component of the CPI had an anomalous monthly jump of 0.6%, the biggest such increase since September 2023, which caused the YoY growth to increase to 3.3%, but I expect the downward drumbeat of disinflation in the housing aspect of consumer prices to resume in the next month or two.
