Case Shiller Home Prices: Re-acceleration Prior To Shutdowns
April 28, 2020
Bottom Line: Home prices nationwide rose in the first two months of the year, re-accelerating in late '19 and into '20 after rebalancing for the impact of tax changes in 2018. Mortgage rates were moving lower throughout the second half of 2019. Prices were 62% above the cyclical nadir in January 2012 after the last crisis. Since the novel coronavirus and related shutdowns, housing activity has come to a near halt in many parts of the country. After several years of 2.5 - 5% appreciation annually, it is hard to assess the impact the shutdowns will have on prices. While inventory was low before this new crisis, there will likely be stressed sellers in the market throughout the rest of 2020. The more significant factor will be the extent of job layoffs across higher-paying sectors and how quickly all areas can get back to work. Lower mortgage rates, aided by the Fed's buying, should keep homes typically financed with conforming balance loans well bid. Non-conforming balance loans may prove much harder to get and come with higher rates for an extended period, leaving downward pressure on prices in higher-end markets. Case Shiller 20-City Home Price Index ROSE by 0.45% (seasonally adjusted) in February to 222.0, compared with market expectations for an increase of 0.4%. Home prices are 3.4% ABOVE their year-ago level. Nationwide home prices are now just 7.4% ABOVE their April 2006 peak, near late 2005 levels and 62.2% ABOVE their January 2012 trough. On a non-seasonally adjusted basis, the home price index ROSE by 0.5% on the month. Housing prices rose in 20 of the 20 metro areas in February (on a seasonally adjusted basis) and in 20 of 20 metro areas on a year-over-year basis. Chicago had the smallest year-over-year increase at 0.8% while Phoenix had the largest year-over-year increase at 7.7%.
Article by Contingent Macro Advisors