S&P CoreLogic Case-Shiller Index Shows Slower Decline in Home Prices

The 20-city index declined 1.7% in May from year-ago levels, while the national index fell 0.4%.

The Case-Shiller indexes lag behind other measures of home prices, but are closely watched because of their methodology. The indexes are meant to track changes in the price of the same home over time, negating factors such as size or quality that might skew less comprehensive measures of median home-sale prices. They are also reported both as unadjusted and seasonally-adjusted data, allowing easier comparisons to the month prior. 

Home prices measured by the Case-Shiller 20-city index have been lower than year-ago levels since March. Annual declines in the national index, which measures home-price changes more broadly, occurred starting in April, with shallower declines.

The drops below year-ago levels are more a reflection of home prices’ earlier run-up than an indication about the current market. House prices in the seasonally adjusted 20-city index peaked in June 2022 as historically low mortgage rates helped facilitate a homebuying frenzy. High demand for homes, which outstripped a low supply, helped send prices measured by the 20-city index up as much as 21% from a year earlier.

Rising mortgage rates chilled the price gains. Both the national and 20-city indexes began to decline on a monthly basis in July 2022, a relative rarity in recent years for Case-Shiller’s seasonally-adjusted data. National prices slid for seven straight months before rising again in February, while the 20-city index began to rise again in March, revised data show. Gains strengthened in the months that followed.

The month-over-month increases continued in June, though at a slightly slower clip than May, according to seasonally-adjusted data. The national index rose a seasonally-adjusted 0.7%, while the 20-city index gained 0.9%. Economists had expected the report to show the seasonally-adjusted 20-city index increased 1% from May’s level. 

Prices have regained strength in recent months as homes for sale have remained limited, likely because higher mortgage rates have discouraged homeowners from moving, which would generally involve giving up a lower-cost loan for a more expensive one. In May, prices in seven of the 20 cities tracked by the Case-Shiller index hit new seasonally adjusted highs, data show. 

A more recent, but less comprehensive, measure of home prices rose above year-ago levels in July for the first time since February. The National Association of Realtors said this month that the median home sold for $406,700 in July, roughly 2% above the same month one year prior. 

Of course, both the Case-Shiller and Realtors data cover a period before mortgage rates again rose above 7% in August, hitting the highest level in decades. That increase, combined with strong home prices, could put more of a strain on housing demand. 

What will happen to home prices has yet to be seen but the rise in mortgage rates represents a threat to their recent strength. “We recognize that the market’s gains could be truncated by increases in mortgage rates or by general economic weakness, but the breadth and strength of this month’s report are consistent with an optimistic view of future results,” S&P Dow Jones Indices managing director Craig J. Lazzara said in a statement.

Write to Shaina Mishkin at [email protected]