Economists' Outlook

Housing stats and analysis from NAR's research experts.

Case-Shiller Home Price Numbers

  • Today, S&P/Case-Shiller showed that home prices grew 5.6 percent year over year in August for the 20-city index while the 10-city index showed a gain of 5.5 percent.  The newer Case Shiller monthly national index showed a gain of 5.1 percent year over year in the August.
  • Headlines seem to be focusing on the slow-down in prices as if it is a bad thing, almost as if we are beginning another housing correction.  Here is another perspective: for now, prices are still growing but at a healthier, slower pace.  There is a big difference between slow growth in prices and price declines.  In the latter situation, home owners are losing equity and the monthly mortgage payments may not help them build up equity faster than it is being lost to home price declines.  In the former situation, home owners are gaining equity from price growth AND from paying their mortgage each month, though they may not be accumulating equity quite as quickly as they did when home prices were gaining at a double digit pace.
  • The slow-down in price growth is only just now bringing appreciation back into a more normal, sustainable level of growth.  Because the housing market overshot on the downside (prices corrected to levels that were unsustainably low), it was not alarming to see double-digit price growth in housing last year, but that trend cannot continue indefinitely unless incomes grow commensurately (and in case you missed those headlines, income growth has not grown at anywhere near that pace.)
  • The good news is that no matter the measure used to evaluate home prices, we are seeing the same trend: a return to a more normal level of price growth.  This slower pace of growth is good for buyers without harming current home owners.  Market fundamentals of income growth and construction should keep supply and demand balanced enough to foster continued, normal growth of prices going forward.
  • Last week NAR released median home price information that showed gains of 5.9 percent in September 2014 home prices compared to September 2013.  These gains followed NAR’s estimate of 4.5 percent gains for the year ending in August 2014.  September was the 6th consecutive month of housing price gains in the 4 to 6 percent range, what is typically considered normal, and notably slower than double-digit price growth in summer/fall 2013.
  • Also last week, the FHFA released their housing price index data for August.  FHFA’s data, like NAR’s, showed continued but decelerating home price gains.  FHFA estimated growth of 4.8 percent for the year ending August 2014.
  • NAR reports the median price of all homes that have sold while FHFA and Case-Shiller report the results of a weighted repeat-sales index.
  • The reason Case-Shiller’s reported price growth is higher than NAR’s is likely a result of the data lag.  Case Shiller uses public records data which has a reporting lag.  To deal with the lag, Case Shiller data is based on a 3 month moving average, so reported August prices include information from repeat transactions closed in June, July, and August.  For this reason, changes in the NAR median price tend to lead Case Shiller changes.
  • FHFA sources data primarily from Fannie and Freddie mortgages, transactions using prime conventional financing, and misses out on cash transactions as well as jumbo, subprime, and government backed transactions such as those using VA or FHA financing.  Sometimes, these non-Fannie and Freddie financed purchases have more volatile price trends.
  • Given recent trends in NAR data, we expect Case Shiller- and FHFA-measured price growth to continue to moderate in the next few months.
  • For those interested in the local perspective, stay tuned for NAR’s metro home price release out later next week or contact a local expert who can give you the most current local MLS information and put these national headlines in context.


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