Midterm Elections and Interest Rates Dampen Home-Price Growth in November

S&P CoreLogic Case-Shiller Home Price Indices Shows Home Price Growth at its Lowest Level Since November 2016

By Ralph McLaughlin Housing Affordability, Mortgage Finance

According to the latest S&P CoreLogic Case-Shiller National Home Price Index, home prices in the United States grew by 5.2 percent in November. This is the eighth[1] consecutive month of slowing home-price growth, which is now at its lowest level since November 2016.

CoreLogic S&P Case-Shiller Index Annual Change

Average home prices for the top 10 metropolitan areas increased 4.3 percent, down from the previous month’s 4.7 percent increase. The top 20 metropolitan areas also posted a gain of 4.7 percent year over year, down from 5 percent in October. Further, 13 of the 20 metropolitan areas reported slower price increases month over month, up from 11 in the previous month.

CoreLogic S&P Case-Shiller Index Annual Change

Home prices have continued to rise quickly in the West of the country, with Las Vegas (12 percent), Phoenix (8.1 percent) and Seattle(6.3 percent) accounting for the highest year-over-year price increases. Conversely, metros west of the Mississippi also accounted for the largest price growth slowdowns in November, with Seattle (6.4 point drop), San Diego (4.1 point drop) and San Francisco (3.5 point drop) experiencing the largest home-price declines.

October 2018 Annual Growth

Pending elections and rising interest rates also helped to cool price growth in November, pushing demand into a temporary holding pattern. Contracts for most November home sales would have been signed in October when interest rates began to ascend to a 10-year high. To compound matters, the 2018 midterm elections likely rattled some buyers. As a result, we expect December’s S&P CoreLogic Case-Shiller National Home Price Index to slow to around 5 percent growth year over year. Many potential homebuyers are likely to hold tight because of peaking mortgage rates and continued fallout from the midterm elections. We also expect price growth to continue to fall through January and February, as the government shutdown likely brought uncertainty to some homebuyers, especially those using government programs to buy.

[1] In the event that the change for consecutive months was identical to the previous months using one decimal point, we expand the measure to multiple decimal points to break the tie.

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