According to data released Tuesday by S&P Dow Jones Indices, home prices measured by Case-Shiller indexes fell nationally from year-ago levels for the first time since 2012. Home prices in April, measured by the unadjusted S&P CoreLogic Case-Shiller U.S. National Home Price Index, fell 0.2% from year-ago levels, marking the first year-over-year price decline since April 2012.
The 20-city index, which tracks changes in some of the largest metropolitan areas, experienced a further decline from year-ago levels from March to April. Prices fell 1.7% from last year’s level, a greater decline than March’s 1.1% drop.
Although the year-over-year national decline in the Case-Shiller indexes wasn’t necessarily surprising, seasonally adjusted prices picked up strongly from the month prior. This suggests that, at least for now, the worst of the home-price reset is over.
This news follows February’s trend of the national median home price being below year-ago levels that continued through May’s data, released earlier this month.
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Home Prices on the Rise
Economists typically monitor year-over-year changes in home prices to gauge market shifts. However, due to last year’s unexpected downturn in the housing market amid a sharp rise in mortgage rates, other metrics may better reflect current trends.
According to seasonally adjusted month-over-month readings by Case-Shiller, recent home-price gains have been particularly robust. In April, the national index witnessed a 0.5% increase from March, while the 20-city index surged even higher at 0.9%. These rates represent greater gains than the historic April averages of 0.4% and 0.6%, respectively.
Craig Lazzara, managing director at S&P Dow Jones Indices, interprets the elevated readings as evidence that the market “continued to strengthen” in April.
Home Prices Stabilize in April
According to a report by S&P Dow Jones Indices, home price growth remained stable in April, indicating a possible end to the decline that began in June of the previous year. The report suggested that the limited supply of existing homes has played a significant role in keeping prices elevated. Moody’s Analytics economist Matthew Walsh noted that the limited supply of homes for sale could explain the 12.2% jump in sales of new homes recorded in May. The increase in new home sales comes as existing-home sales remain relatively slow, with sales in May roughly 20% lower than one year earlier.
Potential risks to the stability of housing prices include the impact of current mortgage rates and any continued economic weakness. Despite these challenges, the report suggests that if the market can continue to navigate these issues, home prices could experience a sustained period of growth and stability.
Home Builder Shares on the Rise
The latest data release has resulted in an increase in the shares of home builders. The iShares U.S. Home Construction ETF (ITB) and the SPDR S&P Homebuilders ETF (XHB), two exchange-traded funds that track home builders and related industries, saw a boost of 1.8% and 1.9% respectively during morning trading. In comparison, the S&P 500 had a 0.3% increase.