Housing Prices – Slowing to Sustainable Growth

The Federal Housing Finance Agency (FHFA) and the Standard and Poor’s/Case-Shiller recently released their respective home price indices for April.

House prices have been recovering since reaching the bottom of the downturn in 2012. Both the new and existing single-family homes’ median sale prices are presented along with the home price index. All three indicators tell a similar story of rapid acceleration during the housing boom, sharp declines during the bust and steady recovery since 2012.

Figure1_April_new

The annualized growth rate of the FHFA price index has been volatile month to month but provides a detailed measure of the pre-boom stability, boom period acceleration, subsequent collapse and recovery of prices. The post-crash growth rate reached a double digit peak in 2013 but has decelerated to more sustainable levels since then. The annual growth rate is 3.4% in April, comparable with the 4.1% in March and lower than the 8.6% in February. The recent more subdue growth has brought the index level back in line with the pre-boom and bust trend.

Figure2_April

House prices reported by the Standard and Poor’s/Case-Shiller show the same dynamics as the FHFA index, sharply rising prices during the boom followed by steep declines and finally recovery beginning in 2012. The Case-Shiller index also shows volatile monthly growth rates and a deceleration in price growth since 2013.

Figure3_April



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