June house price indices do not yet show a peak;  there is probably no reprieve in the "official" consumer housing measure

– by a New Deal Democrat

Yesterday, the Case Shiller and FHFA home price indexes were updated to June (technically, the average from April to June.

Since the Case Shiller index is not seasonally adjusted, the best way to show them is on an annual basis. Here are the year-over-year changes over the past 2 years for each (although the FHFA *is* seasonally adjusted and only increased +0.1% for the month to a new record):

Remember, my rule of thumb for non-seasonally adjusted data is that a peak is most likely when year-over-year earnings fall to only 1/2 of their peak over the past 12 months. By that standard, although both slowed to 12-month lows of +18.0% and 16.2% respectively, that’s not much below their recent highs of 20.6% and 19.3% earlier this year.

Also, FHFA tends to turn slightly ahead of the Case Shiller index, and FHFA’s year-over-year earnings appear to have peaked in February, just ahead of the Case Shiller.

Anyway, these two indices tell us belatedly that prices have not peaked in the spring.

Remember, the median price for new homes appears to have peaked in April (the data below *is* seasonally adjusted):

Furthermore, below are the year-over-year changes for each month in the average sales price of existing homes over the last 15 months (again, the NAR does not seasonally adjust this data):

April 2021 +19.1%

May +23.6% [peak]

June +23%

July +20%

August +15%

September +13%

October +13.1%

November +13.9%

December 2021 +15.8%

January 2022 +15.4%

February 2022 +15%

March 2022 +15%

April 2022 +10.4% [lowest]

May 2022 +14.8%

June 2022 +13.4%

July 2022 +10.8%

The price of existing homes appears to be near its peak of the past 4 months.

Put it all together, and the result is that while new home prices likely peaked a few months ago, existing home prices were still rising midway through the year. It will take another month or two to know if they have peaked in the summer.

Finally, as I’ve written many times over the past 9 months, the CPI’s measure of housing, “equivalent owner rent,” lags actual home prices by about a year or more. Here are the year-over-year changes in house price indices relative to OER (*2 for scale) over the past 20 years:

In July, the year-over-year increase in OER continued to accelerate. They may have more to come, or they may be near their peak on a yearly basis. But I don’t expect a significant drop in OER, which plus rents contributes a full 1/3 of the entire CPI value, apart from the contribution from lower gas prices, I see very little relief in the official measure of inflation for months ahead.

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