Case-Shiller home price index sees another decline in January

Brief window of lower interest rates cushioned decline compared to prior months

Home prices fell month over month again in January, the seventh straight decline recorded by the S&P CoreLogic Case-Shiller U.S. National Home Price Index. But January’s decrease was smaller than in previous months, likely due to a window of lower interest rates that spurred homebuyers into action.

The overall Case-Shiller index fell 0.5% from December to January, dropping to a reading of 292.71. Year over year, the national index remains up slightly. January’s index reading was only 3.8% higher compared to the same month a year ago, down from 5.6% annualized growth in December 2022.

The 10-city and 20-city composite indices, which track home prices in the country’s most populous cities, are also only slightly positive on a year-over-year basis. Both indices logged annualized gains of 2.5% in January. The 10-city index was down from 4.4% yearly growth in December while the 20-city index shrank from 4.6% growth.

“January’s market weakness was broadly based,” said Craig J. Lazzara, managing director at S&P DJI. “Before seasonal adjustment, 19 cities registered a (monthly) decline. The seasonally adjusted picture is a bit brighter, with only 15 cities declining. With or without seasonal adjustment, most cities’ January declines were less severe than their December counterparts.”

Miami remained a model of home price strength among the nation’s largest metros, standing as the singular city where non-seasonally adjusted prices didn’t decline month over month in January. The Florida city led all markets with a 13.8% annualized price jump, followed by Tampa at 10.5% and Atlanta at 8.4%.

At the other end of the spectrum, home price performance in West Coast cities continued to lag. San Diego (down 1.4% annually) and Portland, Oregon (-0.5%) joined San Francisco (-7.6%) and Seattle (-5.1%) as cities with negative year-over-year price growth. The West region, unsurprisingly, was the weakest region in terms of price performance, down 1.5% yearly, while the South (which was up 10.2%) remains on the strongest footing.

With the regional banking crisis serving as a new wrench in the already gummed-up works of the U.S. economy, look for ongoing monetary instability to keep downward pressure on home prices in the near term, according to Lazzara.

“Financial news this month has been dominated by ructions in the commercial banking industry, as some institutions’ risk-management functions proved unequal to the rising level of interest rates,” he said. “Despite this, the Federal Reserve remains focused on its inflation-reduction targets, which suggest that rates may remain elevated in the near term. Mortgage financing and the prospect of economic weakness are therefore likely to remain a headwind for housing prices for at least the next several months.”


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