- by New Deal democrat
This morning we got the final housing reports for the month, the repeat house price indexes from the FHFA and Case Shiller. Both continued to show deceleration from one year ago, but conflicting signals for the last few months.
On a seasonally adjusted basis, in the three month average through November, U.S. house prices according to the Case-Shiller national index (light blue in the graphs below) rose 0.4%, and the somewhat more leading FHFA purchase only index (dark blue) rose only 0.1%, the lowest monthly increase since June [Note: FRED hasn’t updated the FHFA data yet]:
On a YoY basis, the Case Shiller index accelerated 0.2% to a 3.8% gain, while the FHFA index decelerated -0.3% to a 4.2% YoY increase. both of these are reversals from their October directions:
Because house prices lead the measure of shelter inflation in the CPI, specifically Owners Equivalent Rent by 12-18 months, here is the updated calculation of its trend. There is every reason to believe that OER should continue to trend gradually towards 3-3.5% YoY increases in the months ahead:
The most leading rental indexes, including the Fed’s experimental all new rental index, continue to indicate that YoY rent increases should decline further, which adds to the evidence for further deceleration in that huge component of consumer price inflation.
Because prices generally follow sales, and in the past few months existing home sales have risen close to the upper limit of their range in the past 2 years, as per the updated graph below:
An open question is whether the increased price pressure in the existing home market that we saw in the December report earlier this week will persist. If the FHFA and Case Shiller Indexes stabilize near the recent YoY levels, then the trend of slowly abating shelter inflation in the CPI may slow even further.
