Economists predict that home prices will continue to increase in August, although higher mortgage rates may begin to impact these gains in the near future.
The S&P CoreLogic Case-Shiller Home Price Indices for August are set to be released at 9 a.m. on Tuesday. According to FactSet, consensus estimates suggest that home prices in 20 major cities across the US increased by a seasonally-adjusted 0.6% compared to the previous month, and were up 1.6% from August 2022.
However, there are potential obstacles on the horizon, particularly in the form of persistently high mortgage rates that currently hover around 8%. Craig J. Lazzara, Managing Director at S&P Dow Jones Indices, commented last month that July’s data indicated an optimistic outlook for the market, but warned that these gains could be curtailed by rising mortgage rates or economic weakness.
Taking a longer view, the year-over-year comparison is likely to show the largest gain since January. However, this increase is more likely a reflection of last year’s decline in home prices during the second half of the year rather than current strength in the market. The 20-city index peaked in June 2022 and experienced a decline in the subsequent months as mortgage rates rose. As a result, this year’s data for the second half of 2023 will benefit from easier comparisons.
For a more immediate assessment of current home price trends, one should focus on the month-over-month gains reported by Case-Shiller. Due to its lagging nature, this index may not fully capture the recent impact of rising mortgage rates in this month’s data release. It is projected that the 20-city index will show a monthly increase of 0.6%, which is higher than average but represents the slowest seasonally-adjusted gain since March.