What two house price indexes show about the current state of the housing market
Two major house price indexes released updated numbers on Tuesday, both showing the continued slowing of home price growth.
The S&P Cotality Case-Shiller Index national index grew by 1.9% in June year-over-year. The US Federal Housing (FHFA) House Price Index (HPI) showed no change in the second quarter of 2025 from the first, and a 2.9% increase from the same period last year.
The overall slight annual increase hides what has been a volatile year for home prices, according to Nicholas Godec, head of fixed income tradables and commodities and S&P Dow Jones Indices.
“June's results mark the continuation of a decisive shift in the housing market, with national home prices rising just 1.9% year-over-year—the slowest pace since the summer of 2023," Godec said. "What makes this deceleration particularly noteworthy is the underlying pattern: The modest 1.9% annual gain masks significant volatility, with the first half of the period showing declining prices (-0.6%) that were more than offset by a 2.5% surge in the most recent six months, suggesting the housing market experienced a meaningful inflection point around the start of 2025.”
The concern in the Case-Shiller Index is that home prices are not outpacing inflation, which Godec says is the first time in years that has been the case.
"For the first time in years, home prices are failing to keep pace with broader inflation," Godec said. “From June 2024 to June 2025, the Consumer Price Index climbed 2.7%, substantially outpacing the 1.9% gain in national home prices. This reversal is historically significant: During the pandemic surge, home values were climbing at double-digit annual rates that far exceeded inflation, building substantial real wealth for homeowners. Now, American housing wealth has actually declined in inflation-adjusted terms over the past year—a notable erosion that reflects the market's new equilibrium.”
Price changes vary by region
Despite the slowing climb in prices, house prices rose in 46 states in Q2, according to the FHFA HPI. The largest gains were in New York (8.0%), Connecticut (7.8%), New Jersey (7.5%), Mississippi (7.3%) and Illinois (6.7%).
Four states and the District of Columbia saw declines, with DC seeing the biggest drop at 7.6%.
The report said house prices rose in 81 of the 100 largest metro areas year-over-year. Rochester, NY, saw the largest jump at 10.3%, with North Port-Bradenton-Sarasota, FL, seeing the largest decline at 11.2%.
In the Case-Shiller report, the New York and Chicago markets saw big increases, with New York increasing 7% and Chicago 6.1%. Tampa and Phoenix, which saw large increases during the pandemic, saw continued slides, falling 2.4% and 0.1%, respectively.
Kristi Hardy of Atlantic Coast Mortgage says inventory is up significantly, and homes are now selling closer to list price and staying on the market longer.https://t.co/XTySdWaDkd
— Mortgage Professional America Magazine (@MPAMagazineUS) August 6, 2025
The bigger surprise is the fall in western markets, with San Diego (-0.6%) and San Francisco (-2.0%) seeing price drops year over year.
Godec said that despite the slowing price growth in some markets, weak demand continues to be the story in the housing market.
"The monthly patterns in June reveal a market caught between seasonal forces and underlying weakness,” Godec said. “While 13 of 20 metros posted monthly gains before seasonal adjustment, the national index managed just 0.1% growth. After seasonal adjustment, all three headline composites declined, with the National Index falling 0.3%, suggesting that underlying housing demand remains weak despite normal seasonal buying patterns.”
Looking ahead
The next few months will likely bring some additional volatility to the market, as tariff impacts continue to be priced in, and potential Fed rate cuts could help move mortgage rates.
Godec believes that we could be seeing a market correction in the housing industry, which could eventually lead to a healthier market.
“Looking ahead, this housing cycle's maturation appears to be settling around inflation-parity growth rather than the wealth-building engine of recent years," Godec said. "The regional rotation from Sun Belt to traditional industrial centers likely reflects more sustainable fundamentals—employment growth, relative affordability, and demographic shifts that favor established metros over speculative markets.
“While this represents a loss of the extraordinary gains homeowners enjoyed from 2020-2022, it may signal a healthier long-term trajectory where housing appreciation aligns more closely with broader economic fundamentals rather than speculative excess."
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