The S&P Case-Shiller Index

In one of the hottest national real-estate markets in decades, the U.S. has seen home prices in many markets skyrocket to new heights before decelerating mid-year 2022. The Federal Reserves actions, to combat inflation by increasing interest rates, also increased mortgage rates and priced many buyers out of the market.

For those who need to track U.S. residential real estate prices, or who just want to be up-to-date with this information, there is the S&P CoreLogic Case Shiller home price indices. The indices are calculated monthly using a three-month moving average.

The index is based on a pricing technique developed in the 1980s by economists Karl Case and Robert Shiller. The National Home Price Index (HPI) tracks the changes in the values of residential single-family houses in nine U.S. regions.

The S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index seeks to measures the value of residential real estate in 20 major U.S. metropolitan areas: Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa and Washington, D.C.

The index is an economic indicator that measures the change in value of U.S. single-family homes on a monthly basis. Within the S&P CoreLogic Case-Shiller 20-City index are contained separate indexes that focus on each of the 20 markets. For instance, the one-year return, ending in July of 2022 for the Phoenix Home Price NSA Index is 22.36 percent.

The year 2000 is used as the baseline for the index. This baseline allows the index to account for inflation.

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A Deceleration

There is also a 10-city composite index, covering 10 metro areas of major cities. Those cities include Las Vegas, Washington, D.C., San Francisco, Denver, Los Angeles, San Diego, Boston, Chicago, New York and Miami.

The index hit a peak in 2006 and a trough in 2012. Each index employs a method that compares the sale price of a given property in successive transactions. For this reason, a new-build would not be included until it had been resold.

Foreclosures are excluded, as are sales between family members. If a property has been resold more than once in a six-month period, it is also excluded.

In June 2022, the 20-City Composite posted an 18.6 percent year-over-year gain, down from 20.5 percent in May. By July, the year-over-year gain had fallen to 16.1 percent. Price increases in all 20 cities had slowed even more than in June.

The cities with the highest year-over-year gains found Tampa in the top spot, followed by another Florida city: Miami. Dallas rounded out the top three. Although the Home Price Index was up year-over-year in April 2022, it was still down from March.

What is causing the index to turn around? The inventory of available homes on the market has been increasing as mortgage rates keep many buyers out of the market. This is leading to price reductions from the original listing price. This is in stark contrast to conditions in the hotter markets only months ago where sellers were receiving multiple offers over list price.

Despite this, CoreLogic HPI still forecasts reasonable home price growth through the end of 2022.