Home Prices Drop The Most Year-Over-Year In Over A Decade

Home prices across America dropped from a year earlier in May, the second straight month of year-over-year price declines.

The S&P CoreLogic Case-Schiller National Home Price Index, which reflects a three-month moving average of home prices across the country, fell by 0.5 percent, the largest annual decline since 2012. In April, the index was off by 0.1 percent compared with the month a year earlier.

Despite the annual numbers declining, the index was up 0.7 percent from the prior month. This was the fourth straight monthly increase.

The recent price increases suggest that the housing market has bottomed and is now recovering from the downturn brought on by the shock of the Federal Reserve’s fastest hiking cycle in decades. Mortgage rates have bounced around between six and seven percent this year.

An earlier-than-expected recovery in the housing market poses an unwelcome challenge for the Fed’s campaign to tame inflation. Housing is typically one of the most responsive markets to Fed policy, so buoyant prices could suggest that the economy has already largely digested the Fed’s earlier hikes and inflationary pressures may be set to reassert themselves.

The Case-Shiller 10-city index, which measures home prices in the largest metropolitan areas, fell 0.9 percent from a year earlier, a deceleration from the 1.1 percent decline in April. Compared with the recent peak of home prices in June of last year, the index is down 1.6 percent. On a monthly basis, however, the 10-city index climbed 1.1 percent.

The 20-city index was down 1.7 percent compared with a year earlier and a one percent increase on a monthly basis. Compared with the June 2022 peak, prices are off 2.3 percent.

“The rally in U.S. home prices continued in May 2023,” said Craig J. Lazzara, Managing Director at S&P DJI. “The ongoing recovery in home prices is broadly based. Before seasonal adjustment, prices rose in all 20 cities in May (as they had also done in March and April). Seasonally adjusted data showed rising prices in 19 cities in May, repeating April’s performance.”

The Case-Shiller indexes are regarded as the gold standard of housing price metrics. They are based on repeat sales data that are regarded as more reliable than the monthly median price data released by the National Association of Realtors. The median figure can be influenced by the composition of homes sold in a month. For example, the median can fall if a larger volume of sales happens in lower-priced homes even if home prices have not moved or even increased. The NAR said the median price of existing homes sold in June fell 0.9 percent.