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Tuesday, January 25, 2022

Comments on Case-Shiller and FHFA House Price Increases

by Calculated Risk on 1/25/2022 09:51:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Case-Shiller National Index up 18.8% Year-over-year in November


This graph below shows existing home months-of-supply (inverted, from the NAR) vs. the seasonally adjusted month-to-month price change in the Case-Shiller National Index (both since January 1999 through November 2021).

Case-Shiller MoM House Prices
There is a clear relationship, and this is no surprise (but interesting to graph).  If months-of-supply is high, prices decline. If months-of-supply is very low (like now), prices rise quickly.

In November, the months-of-supply was at 2.1 months, and the Case-Shiller National Index (SA) increased 1.14% month-over-month.  The black arrow points to the November 2021 dot. In the December existing home sales report, the NAR reported months-of-supply decreased to a record low 1.8 months in December.

We are seeing the expected deceleration in house price growth, and this trend will probably continue for at least a few more months. My sense is the Case-Shiller National annual growth rate of 19.99% in August was probably the peak YoY growth rate, however, since the normal level of inventory is probably in the 4 to 6 months range - we’d have to see a significant increase in inventory to sharply slow price increases, and that is why I’m focused on inventory!emphasis added
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