Gap between home prices and inflation widens
Home prices in the United States continue to outpace inflation by a significant margin, according to the latest data from the S&P CoreLogic Case-Shiller Indices.
The report for June 2024 showed that while the growth rate of home prices is slowing, the gap between home price increases and inflation remains larger than historical norms.
The S&P CoreLogic Case-Shiller Home Price Index, which covers all nine US census divisions, recorded a 5.4% annual gain in June, down from 5.9% in May. The 10-City Composite and 20-City Composite indices also showed year-over-year gains of 7.4% and 6.5%, respectively, both slightly lower than the previous month’s figures.
Despite the deceleration, home prices are still rising faster than inflation.
“The S&P CoreLogic Case-Shiller Indices continue to show above-trend real price performance when accounting for inflation,” said Brian Luke, head of commodities, real and digital assets. “Home prices and inflation continue to factor into the political agenda coming into the election season. While both housing and inflation have slowed, the gap between the two is larger than historical norms, with our National Index averaging 2.8% more than the Consumer Price Index.
“That is a full percentage point above the 50-year average.”
Over the long term, home prices have significantly outpaced inflation. Since 1974, home prices have increased over 1,100% before adjusting for inflation. However, when adjusted for inflation, they have only slightly more than doubled, rising by 111%.
Luke also noted the ongoing challenge of housing affordability, especially for first-time homebuyers. Analyzing data from the 16 markets covered by the S&P CoreLogic Case-Shiller Indices, the report found that lower-priced homes in most markets have appreciated faster than the overall market.
“Another popular theme is making housing more affordable to first-time homebuyers,” Luke said. “Our tiered indices divide each market into three price tiers, which range based on the market. Looking at the last five years, 75% of the markets covered show low-price tiers rising faster than the overall market.”
For instance, in Atlanta, lower-tier homes have risen 18% faster than middle- and higher-tier homes over the past five years. New York’s low-tier homes have outperformed the overall market by nearly 20%, while the city’s high-tier homes have lagged the market by 5.1%.
In June, New York reported the highest annual gain among the 20 cities tracked by the indices, with a 9.0% increase. San Diego and Las Vegas followed closely with annual gains of 8.7% and 8.5%, respectively. At the other end of the spectrum, Portland recorded the smallest year-over-year growth, with just a 0.8% increase in June.
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