Nominal prices rose, but inflation outpaced gains for the fourth straight month
United States home price growth continued to lose steam in August, with the S&P Cotality Case-Shiller US National Home Price NSA Index posting a 1.5% annual gain—its weakest showing in over two years.
That increase, however, fell well short of the 3% inflation rate, marking the fourth consecutive month in which homeowners saw their real housing wealth decline.
“August’s data shows US home prices continuing to slow, with the National Index up just 1.5% year-over-year,” said Nicholas Godec, CFA, CAIA, CIPM, head of fixed income tradables & commodities at S&P Dow Jones Indices.
“This marks the weakest annual gain in over two years and falls well below the 3% inflation rate. For the fourth straight month, home values have lost ground to inflation, meaning homeowners are seeing their real wealth decline even as nominal prices inch higher.”
Godec added, “The National Index rose 1.5% over the past year, with most of that gain coming in the recent six months (up 1.5%) while the prior six months were essentially flat. The 20-City Composite gained 1.6% annually and the 10-City rose 2.1%, both continuing their deceleration from earlier in the year.”
Regional divergence widens as Midwest and Northeast outperform
Chicago, New York, and Cleveland led the pack with annual gains of 5.9%, 6.1%, and 4.7%, respectively.
Meanwhile, pandemic boomtowns like Tampa, Phoenix, and Miami posted the steepest declines, with Tampa falling 3.3% year-over-year, Phoenix down 1.7%, and Miami off 1.7%.
Western markets such as San Francisco, Denver, and San Diego also saw prices slip.
Monthly declines signal broad-based weakness
Month-over-month, the picture was even weaker. Nineteen of the 20 tracked metros posted declines before seasonal adjustment, with only Chicago bucking the trend.
The National Index fell 0.3% for the month, while the 10-City and 20-City Composites dropped 0.6%. After seasonal adjustment, all three indices remained negative, suggesting that the weakness extended beyond typical seasonal patterns.
Mortgage rates above 6.5% continued to weigh heavily on buyer demand, even during what is typically the busiest season for home sales.
“The combination of high financing costs and prices that remain near record highs has limited transaction activity,” Godec said.
“Markets that experienced the sharpest pandemic-era gains are now seeing the largest corrections, while more affordable metros with stable local economies are holding up better.”
Adjusting to a new normal
The latest Case-Shiller data comes as the US housing market adjusts to a post-pandemic reality. The rapid appreciation of recent years has clearly ended, and the market appears to be seeking a new equilibrium. With price growth now running at half the rate of inflation and several major metros in decline, both buyers and homeowners are facing a more challenging environment.
Meanwhile, according to the latest Federal Housing Finance Agency (FHFA) House Price Index (HPI) report, US house prices ticked up 0.4% in August.
Over the past year, prices climbed 2.3% nationally, a marked slowdown from the previous 12 months, when annual growth reached 4.6%. The FHFA revised July’s previously reported 0.1% dip to flat, underscoring the market’s recent stability.
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