Barrington Homebuyers: September Case-Shiller Results and October Forecast: A Slow Return to the Push-Pull of a Normal Market

Tuesday, November 27, 2018

September Case-Shiller Results and October Forecast: A Slow Return to the Push-Pull of a Normal Market

The U.S. National S&P CoreLogic Case-Shiller Home Price Index - which tracks home prices - rose 5.5 percent in September from a year earlier, in line with Zillow's forecast last month.
The S&P CoreLogic Case-Shiller 20-city index climbed 5.1 percent annually in September, down from 5.5 percent in August. The 10-city index rose 4.8 percent, down from 5.2 percent.
Zillow forecasts an even slower 5.4 percent annual gain for October.

Home prices are tapping on the brakes, with the pace of growth slowing again in September, to 5.5 percent year-over year, according to the Case-Shiller home price index. The gain was in line with Zillow’s forecast and slower than the 5.7 percent annual gain in August. We forecast another slowdown in October, with home prices climbing just 5.4 percent annually.

The slower growth in home prices indicates a national housing market that’s finally finding more balance between buyers and sellers after years of near-total seller control.

There are already signs that the market is starting to swing toward buyers: Inventory is up after almost four years of uninterrupted declines, especially in formerly red-hot and pricey West Coast markets, and price cuts are becoming more frequent.

Additionally, a softening rental market may give some would-be buyers a little extra time to organize their finances and save more without the added pressure of an impending rent hike to force their hands. But while the pendulum is slowly swinging back in favor of buyers, make no mistake that sellers and current homeowners still have an advantage in this game of tug-of-war.

Inventory is up, but from incredibly low levels that will not fully recover for years – and competition for the most affordable homes remains as fierce as ever. Although price cuts are more common, the size of the typical price cut has been steady. The cuts we are seeing are not acts of desperation; they’re just testing how warm the waters are.

Mortgage rates continue to creep higher, and home prices themselves are still very much on the rise – just a bit less quickly than before – both of which are denting affordability. If more renters delay their moves in the face of a softening market, that may eventually push rents back up as vacancy rates fall. Still, it's undoubtedly a good thing to see a return to the more natural push and pull of the market, after years in which it moved in only one direction.