National Home Value Growth Accelerates Yet Continues To Trail Inflation

National home values posted modest gains in August, picking up speed from July, though price growth still failed to keep pace with inflation.

The value of single-family homes as measured by repeat transactions rose 2.1% year over year in August, up from a 1.9% annual increase the month before, according to data from the S&P Cotality Case-Shiller Index released Tuesday.

The more robust growth came even as the median existing-home sales price slowed to a 1.6% annual gain in August.

However, while nominal home values accelerated nationally, they fell in real terms for the 15th consecutive month, as August's 3.4% inflation rate ran roughly 1.3 percentage points above the home value gain.

Across the 20 cities tracked by the index, Chicago once again took pole position, leading the U.S. for the sixth consecutive month with a 6.7% annual gain, down slightly from July. New York followed with a year-over-year increase of 6.2%. Cleveland took bronze, registering a gain of 4.3%.

"Seasonality continued to weigh on headline monthly results," says Rebecca Kaufman, associate director of commodities at S&P Dow Jones Indices. "On a non-seasonally adjusted basis, the
U.S. National and 10-City Composite Indices fell 0.2% and 0.4%, respectively, while their seasonally
adjusted counterparts rose 0.3% and 0.4%. The divergence suggests that the typical post-summer
slowdown is obscuring some underlying strength in home prices."

However, Kaufman concedes that affordability remains a challenge.

Referring to August data before mortgage rates crossed the 7% threshold, she notes: "With inflation at 3.4%, Brent crude near $100 per barrel and mortgage rates in the mid-to-high 6% range, households continue to face elevated costs alongside persistently high home prices."

The latest Case-Shiller report highlights a persistent regional divergence in home prices. Seattle posted the nation's steepest annual decline for the third month in a row, slipping 1.6%, followed by Las Vegas (-1.3%), and Denver (-0.8%).

"The years-long East-West divide persists, with six out of the eight Eastern metropolitan markets
recording greater year-over-year changes in July versus June, compared with just two of the eight
Western metropolitan markets," says Kaufman.

As in June and July, a gap of nearly 9 percentage points separated the strongest housing market, Chicago, which was bolstered by tight resale supply and limited new construction, from the weakest, Seattle.

What this means for homebuyers

Looking ahead, Realtor.com® senior economist Anthony Smith reminds that the rate backdrop has become considerably more challenging since the end of August.

The 30-year fixed rate climbed to 7.40% in mid-October, the highest level of the year, before easing to 7.32% as of Oct. 22, after the Federal Reserve raised its benchmark rate on Sept. 16 and September Consumer Price Index (CPI) rose to 3.7%.

Pending home sales plunged 7.3% in September to the lowest reading on record and were down 11.3% from a year ago, with declines in all four regions.

"With inventory at its highest level since 2019 and rates above 7%, buyers have more homes to choose from but less power to pay for them," says Smith.

The Case-Shiller Index reports on a two-month delay and reflects a three-month moving average of home sales prices.

Homes usually go under contract a month or two before they close, so the August report primarily reflects purchase decisions made in late spring and early summer.

Although the Index's price data is delayed by several months, it is considered one of the best available measures of changing home values, because it is based on repeat transactions on the same properties.