US Home Price Gains Accelerate Again (But Not In San Francisco)

Following September’s (the last data point) modest reacceleration in home prices (the first since March 2018), Case-Shiller’s October data is expected to stabilize at +2.10% YoY.

But instead, the 20-City Composite accelerated significantly – rising 2.23% YoY – the fastest since May…

Source: Bloomberg

Prices rose on an annual basis in 19 of the 20 cities in the composite measure. Phoenix led with a 5.8% increase, followed by a 4.9% gain in Tampa and 4.8% advance for Charlotte. San Francisco was the lone city to post a year-over-year decline.

With mortgage rates having tumbled, and accounting for the lag in Case-Shiller data and sentiment shifts, one might expect house price appreciation to re-accelerate further as next year begins…

Source: Bloomberg

Finally, some food for thought from Alhambra’s Jeffrey Snider, the Fed didn’t cause the housing slump with its “rate hikes.” Just like 244 bps fed funds didn’t put the economy into its downturn.

And if the Fed didn’t break it, then the Fed won’t be able to fix it with a few rate cuts. The bond market has already supplied the equivalent of six of them to the average mortgage rate, and so far the real estate data is more about price sensitivity than that positive swing in payment-related buying power.

The continuing depressiveness of housing suggests that as 2019 draws to a close the downside risks remain for a lot more than this one part of the economy. Despite a double dose of unintentional aid (prices and rates), there must be serious countervailing forces more than balancing those out. Ironically, that’s what the price trends and persistently low interest rates suggest, too.