Housing Market Cooldown Reaches Longest Streak Since 2009

Home prices rose by 3.1% annually in June, the 15th consecutive month of annual slowing growth, according to the Standard & Poor’s CoreLogic Case-Shiller National Home Price Indices.

National Home Price NSA Index, covering all nine U.S. census divisions, reported a 3.1% annual gain in June, down from 3.3% in May. The 10-City Composite annual increase slowed to 1.8%, down from 2.2% in May. The 20-City Composite posted a 2.1% year-over-year gain, down from 2.4% in May.

Phoenix, Las Vegas and Tampa reported the highest year-over-year gains among the 20 cities. In June, Phoenix led with a 5.8% year-over-year price increase, followed by Las Vegas at 5.5% and Tampa at 4.7%. Six of the 20 cities reported greater price increases in the year ending June from May.

Before seasonal adjustment, the National Index posted a month-over-month increase of 0.6% in June. The 10-City Composite posted an 0.2% increase, while the 20-City Composite reported an 0.3% increase. After seasonal adjustment, the National Index recorded a 0.2% month-over-month increase in June. The 10-City and the 20-City Composites did not report any gains. In June, 19 of 20 cities reported increases before seasonal adjustment, while 17 of 20 cities reported increases after seasonal adjustment.

“Home price gains continue to trend down, but may be leveling off to a sustainable level,” said Philip Murphy, Managing Director and Global Head of Index Governance with S&P Dow Jones Indices. “While housing has clearly cooled off from 2018, home price gains in most cities remain positive in low single digits. Therefore, it is likely that current rates of change will generally be sustained barring an economic downturn.”

The report said Phoenix overtook Las Vegas as the fastest-growing housing market in the 20-city index, with home price growth of 5.8% and 5.5%, respectively. Metros with the largest slowdown from the previous year continue to be in the West: Seattle (14.1% point drop), San Francisco (9.9% point drop) and Las Vegas (7.5% point drop). Seattle experienced falling home prices for a third straight month, with year-over-year declines of 1.3%. San Francisco also inched closer to flat growth with a year-over-year increase of just 0.7%, its lowest gain since 2012.

“While mortgage rates have come crashing down over the past few months, they have not yet had any impact on housing prices,” said Ralph McLaughlin, Deputy Chief Economist with CoreLogic, Irvine, Calif. “If mortgage rates continue to fall, wages continue to grow and inventory continues to tick up, we can expect the U.S. home price growth to stabilize or even reverse course by the end of the year.”

In a separate report First American Financial Corp., Santa Ana, Calif., said housing affordability improved in June despite rising house prices.

The company’s monthly Real House Price Index said house prices decreased by 2.2 percent between May and June and fell by 4.6 percent year over year. As a result, consumer house-buying power increased by 3.3 percent between May and June and increased by 12.2 percent year over year.

First American Chief Economist Mark Fleming said average household income has increased by 2.4 percent since June 2018 and by 56.4 percent since January 2000. He said “real” house prices are 18.0 percent less expensive than in January 2000.

“Two of the three key drivers of the Real House Price Index, household income and mortgage rates, swung in favor of increased affordability in June,” Fleming said. “The 30-year, fixed-rate mortgage fell by 0.8 percentage points and household income increased 2.4 percent compared with June 2018. When household income rises, consumer house-buying power increases. Declining mortgage rates have a similar impact on affordability, so in June home buyers received a double shot of house-buying power to jolt affordability in their favor nationally.”

The report said no states posted a year-over-year increase in the Index. States with the greatest year-over-year decrease were Wyoming (-9.8 percent), North Dakota (-9.3 percent), California (-9.3 percent), West Virginia (-8.5 percent) and New Mexico (-8.3 percent).

Among metros tracked by First American, the only market with a year-over-year increase was Providence, R.I. (1.3 percent). Markets with the greatest year-over-year were San Jose, Calif. (-15.9 percent), Seattle (-10.9 percent), Portland, Ore. (-10.4 percent), San Francisco (-10.4 percent) and Los Angeles (-8.7 percent).