Comments on March Case-Shiller and FHFA House Price Increases; New Record Monthly Increase

Today, in the Calculated Risk Real Estate Newsletter: Case-Shiller National Index up 20.6% Year-over-year in March; New Record Monthly Increase

Excerpt:

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 March 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 very low (like now), prices rise quickly.

In March, the months-of-supply was at 1.9 months, and the Case-Shiller National Index (SA) increased 2.09% month-over-month.  The black arrow points to the March 2022 dot. In the April existing home sales report, the NAR reported months-of-supply increased to 2.2 months.

This month was very likely the peak YoY growth rate - just above the peak last August. Since inventory is now increasing year-over-year (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!

Since Case-Shiller is a 3-month average, and this report was for March (includes January and February), this included price increases when mortgage rates were significantly lower than today. In January, the Freddie Mac PMMS averaged 3.4% for a 30-year mortgage, and 3.8% in February. Currently mortgage rates are around 5.25%.emphasis added

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/