Midwest cities lead home price rebound for Case-Shiller index

May 2023 prices remain down year over year, but strong short-term gains continue

When it comes to the CoreLogic S&P Case-Shiller Index, what comes down must come up.

That’s the case in cities like Chicago, Detroit and Cleveland — large Midwestern cities that saw significant residential market slowdown during the depths of the COVID-19 pandemic. But now, these Great Lakes metros are among the cities leading a recent price resurgence.

The overall Case-Shiller price index remained down 0.5% year over year in May, its second straight month of negative annualized growth. But that largely reflects price declines from last year as the national index saw its fourth consecutive monthly gain. May posted a 1.2% monthly uptick, just shy of April’s 1.5% increase. U.S. home prices are now up by 4% compared to February.

“The rally in U.S. home prices continued in May 2023,” said Craig J. Lazzara, managing director at S&P DJI. “Our national composite rose by 1.2% [monthly] in May and now stands only 1.% below its June 2022 peak. The 10- and 20-city composites also rose [month over month] in May, in both cases by 1.5%.”

Prices rose on a monthly basis in May in all 20 cities tracked by the index, following the pattern set in March and April. The aforementioned Midwestern cities outpaced the rest of the field, with Cleveland leading all cities by logging a 2.7% increase in non-seasonally adjusted home prices from April to May. Chicago and Detroit each saw a 2.3% month-over-month gain.

Year over year, the same cities were at or near the top of the leaderboard, marking a stunning turnaround from recent history. “Regional differences continue to be striking,” Lazzara said, noting a “revenge of the Rust Belt” scenario in which Chicago (up 4.6%), Cleveland (up 3.9%) and New York City (up 3.5%) were the top performers on a yearly basis.

“If this seems like an unusual occurrence to you, it seems that way to me too. It’s been five years to the month since a cold-weather city held the top spot (and that was Seattle, which isn’t all that cold). Since May 2018, the top-ranked cities have been Las Vegas (12 months), Phoenix (33 months), Tampa (five months) and Miami (five months).”

On the flipside, Western markets continue to struggle when it comes to annualized growth. Seattle and San Francisco saw double-digit yearly price declines of 11.3% and 11%, respectively, while Las Vegas (-7.8%) and Phoenix (-7.6%) saw large slides as well. The silver lining for market watchers in the West is that the short-term outlook is conducive to price recovery in the longer term.

“Home prices are not necessarily following the similar two-markets tale as they did in previous months,” said Selma Hepp, chief economist at CoreLogic. “Prices in many of the previously declining West Coast markets are rebounding and showing some renewed vigor, particularly as those metros have the biggest shortages of homes for sale.”

History, coupled with the recent surge in interest rates, suggests that even with the spring’s unexpectedly strong price activity, gains are set to plateau in the coming months. The Case-Shiller national index’s monthly changes from April to May between 2015 and 2019 averaged 1%.

Still, despite weak sales, the strong price gains reported throughout the spring and early summer are good omens for future price movement.

“Home prices in the U.S. began to fall after June 2022, and May’s data bolster the case that the final month of the decline was January 2023,” Lazzara said. “Granted, the last four months’ price gains could be truncated by increases in mortgage rates or by general economic weakness. But the breadth and strength of May’s report are consistent with an optimistic view of future months.”


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