• The S&P CoreLogic Case-Shiller U.S. national home price index rose 19.5% in September from one year earlier, the first deceleration in house price growth since May 2020.
• The 20-City Composite jumped 1.0% in September from the prior month, the slowest pace of growth since July 2020.
• House price growth will slow in 2022.

The not seasonally adjusted S&P CoreLogic Case-Shiller U.S. national home index rose 19.5% in September from one year earlier, down from 19.8% in August. House price growth slowed in September after accelerating in every month since June 2020.

House prices are now just under 50% higher than the pre-Great Recession peak. The S&P CoreLogic Case-Shiller 20-City index rose 1%% in September from the prior month; prices were up from the prior month in all 20 cities. The strongest gains from the prior month were in Tampa (2.5%), Miami (2.2%) and Atlanta (2.0%). The weakest gains from the prior month were in Minneapolis (0.4%), New York (0.2%) and Cleveland (0.1%). House prices were 19.1% higher on a year-ago basis in 20 U.S. cities. Phoenix (33.1%), Tampa (27.7%) and Miami (25.2%) led the way while Washington DC (13.7%), Minneapolis (12.8%) and Chicago (11.8%) had the weakest gains. Phoenix led the way for the twenty-eighth straight month. 

House prices have increased at an extraordinary pace in 2021. Housing inventory was low coming into the pandemic after many years of underbuilding following the Great Recession but supply-chain disruptions, labor constraints and work stoppages have weighed on construction activity. Supply has been unable to keep up with resilient demand, resulting in unprecedented house price growth since the pandemic started. The demand-supply imbalance will continue well into 2022 and it will be a sellers’ market for the next couple of years.

Existing-home sales, which account for more than 90% of total home sales, have remained resilient despite very limited inventories. The supply of existing homes for sale was 2.4 months at the current sales pace in October, unchanged from September, and down slightly from 2.5 months in October 2020. An improving labor market, demographic trends and healthy consumer balance sheets will be positives for the housing market in 2022. Higher mortgage rates, as the Federal Reserve reduces purchases of long-term Treasurys and mortgage-backed securities, will weigh on house price growth.

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