US CoreLogic S&P Case-Shiller Index Posts A Small Gain In March

According to data from the latest CoreLogic S&P Case-Schiller Index, home price growth in early spring 2023 proved stronger than initially anticipated, reflecting a major imbalance in the housing market. While eager homebuyers jumped in as soon as mortgage rates retreated from their 7% highs, this market dynamic was not met with same enthusiasm from sellers.

As a result, the already tight inventory of existing homes for sale shrank further and thus did not offer the usual spring homebuying season boost. The pressure on home prices reflected in monthly gains illustrates not only buyers’ responsiveness to movements in mortgage rates and pent-up demand due to demographic fundamentals, but also delayed demand from those that were unable to buy in the very competitive housing market during the pandemic.

In March, the CoreLogic S&P Case-Shiller Index squeezed out a 0.7% year-over-year increase, down from a 2% gain in February, marking the 11th straight month of decelerating annual home price gains. With the sharp decline in home price growth over past the year, March’s annual gain was the slowest since the summer of 2012 (Figure 1).

But the non-seasonally adjusted month-to-month index posted a strong gain, up by 1.3% in March from a 0.3% increase in February. Between 2015 and 2019, the monthly index changes from February and March have generally averaged 0.8% (Figure 2).

Cumulatively, home prices in the national index are down by 3.7% from 2022’s high point, an improvement from the 5% cumulative decline recorded last month. In most markets, home prices bottomed out in January and February and are now showing gains. Still, cumulative declines in some markets remain in double digits.

Seattle tops that list, with a 15% cumulative decline since the peak, down from a 17% decrease last month. New York had the nation’s lowest decline of 1%, while Miami, Atlanta and Chicago experienced only about 2% losses. The recent strength in monthly price gains is evident even in the county’s weakest markets, suggesting that the extent of cumulative price declines in those metros may have reached their peaks. Also, as a result of stronger early spring appreciation, the latest CoreLogic’s latest Home Price Index suggests that home prices nationally are expected to average a 4% increase in 2023 compared with the previous year.

Looking at annual changes, the 10- and 20-city composite indexes followed the same decelerating year-over-year trend in March — both down by about 1%. For both composites, these were the slowest increases since 2012. Over the previous month, The 10-city index was up by 1.6%, while the 20-city index increased by 1.5%. The 10-city index includes currently better-performing metros, such as New York and Chicago, which have seen relatively stronger housing market performance since mid-2022, as the return to cities and offices has gotten underway.

Compared with the 2006 peak, the 10-city composite price index is now 39% higher, while the 20-city composite is up by 46%. Adjusted for inflation, which continues to remain concerningly elevated, the 10-city index is now down by 3%, while the 20-city index showed an 2% increase compared with its 2006 high point.

Looking ahead, while housing markets are showing signs of typical seasonal improvement from winter lows, the lack of inventory in many metros, combined with buyer responsiveness to changes in mortgage rates, reflect stronger than anticipated home price gains. Nevertheless, following the strong start to 2023, some potential homebuyers have since been hesitant due to many uncertainties, including banking turmoil, the debt-ceiling crisis, mortgage rate volatility and a continued lack of inventory of homes for sale, all of which suggest that the rest of 2023 will be rocky for housing markets.  Nevertheless, demographic fundamentals combined with robust income growth and scarce inventory may mean that pressure on home prices will persist.