Comments on April Case-Shiller and FHFA House Price Increases

by Calculated Risk on 6/28/2022 11:18:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Case-Shiller National Index up 20.4% Year-over-year in April


This graph below shows existing home months-of-supply (inverted, from the NAR) vs. the seasonally adjusted month-to-month price change in the Case-Shiller National Index (both since January 1999 through April 2022).

Note that the months-of-supply is not seasonally adjusted.

There is a clear relationship, and this is no surprise (but interesting to graph). If months-of-supply is high, prices decline. If months-of-supply is low (like now), prices rise quickly.

In April, the months-of-supply was at 2.2 months, and the Case-Shiller National Index (SA) increased 1.50% month-over-month. The black arrow points to the April 2022 dot. In the May existing home sales report, the NAR reported months-of-supply increased to 2.6 months.Since inventory is now increasing quickly (but still low), we should expect price increases to slow. The normal level of inventory is probably in the 4 to 6 months range, and we will have to see a significant increase in inventory to sharply slow price increases, and that is why I’m focused on inventory!

This was slightly below expectations. There is a significant lag to this data, see: When will House Price Growth Slow? Since Case-Shiller is a 3-month average, and this report was for April (includes February and March closings), this included price increases when mortgage rates were significantly lower than today. This report includes some homes with contracts signed last December (that closed in February)!

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