Case-Shiller data suggests that home-price appreciation is tapering

Home-price growth across the country is beginning to show signs of flattening, with the S&P Case-Shiller U.S. National Home Price NSA Index reporting an annual gain of 19.8% in August. That’s essentially the same gain as the month prior, marking the first time that the year-over-year increase in home prices didn’t see meaningful growth from one month to the next since early 2020.

The cooling also was reflected in the Case-Shiller 10- and 20-city composite indices, which measure price growth in the country’s major cities. The 10-city index was up 18.6% while the 20-city index rose 19.7% — both slightly less than their rates of increase in July.

Selma Hepp, deputy chief economist at CoreLogic, called the flat price growth of August a “turning point.”

“While demand remains strong and buyers are still generally paying more for homes than asking price, the slowing acceleration in home prices suggests that buyer fatigue is setting in, particularly among higher-priced homes where the acceleration in price growth from the previous month has been larger compared to low-tier homes,” she said.

Some of the stall also can be attributed to expected seasonality at the close of the summer homebuying season, Hepp explained. Despite slowing appreciation, however, Craig J. Lazzara, managing director and global head of index investment strategy at S&P DJI, noted that the annualized gain in August remained at a robust level while the broad Case-Shiller index and its composites still stand at all-time highs.

Additionally, Hepp wrote on CoreLogic’s website that several indicators point to demand staying heightened in the near term. Pending home sales suggest that closed transactions this fall should outpace last year’s activity. And while the share of available homes that sold for more than asking price dwindled slightly from the summer peak (52% in August compared to 58% in June), these shares still dwarf historic norms (25% during the summer prior to the pandemic).

It’s worth noting that the 20-city composite index is still seeing more rapid acceleration than its 10-city counterpart. The latter index is limited to prices in the most-populous U.S. metro areas, so the 20-city’s larger gain reflects the price growth seen in smaller, more affordable markets where migration from more expensive cities has helped prices to rise faster.

“We have previously suggested that the strength in the U.S. housing market is being driven in part by a reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes,” Lazzara said. “More data will be required to understand whether this demand surge represents an acceleration of purchases that would have occurred anyway over the next several years, or reflects a secular change in locational preferences. August’s data are consistent with either explanation.”

Phoenix continued to lead all cities with annual price gains of 33.3%. It was the 27th straight month that the Arizona capital topped this category. San Diego (26.2%) was second, followed by Dallas (24.6%) and Seattle (24.3%).


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