Yesterday, the latest S&P Corelogic Case-Shiller (the biggest name in national home price data) home price indices were released for July 2018 (their reports lag behind somewhat). Even though in their press release, S&P stated “Data released today for July 2018 shows that home prices continued their rise across the country over the last 12 months” however, the release went on to say point out, with regard to July’s increase in home prices, that is was “down from 6.2% in the previous month”. This prompted many news outlets to publish articles with headlines about home prices cooling, the market cooling, etc. One of those outlets, and a pretty well-known one in the real estate industry among real estate agents, is RIS media who published an article that began with “The foot on the gas is letting up. The explosive growth in home prices is slowing.”
There is no question that home prices cool, and heat up, regularly and, due to the seasonality of the real estate market, are even somewhat predictable in this fashion. Therefore, should the recent headlines about home prices slowing be of concern to home buyers and sellers in St Louis? This is a question I’ve been hearing a lot lately and will give my thoughts on here.
Home prices fluctuate EVERY month…
As our 5-year chart below clearly illustrates, St Louis home prices fluctuate every single month of the year, year in and year out. In fact, if you move your mouse around our live chart (click on chart for live one) you can see the data for each month and I don’t think you will find two months in a row that were the same. The other thing our charts make it easy to see is the seasonality of home prices. If you look at the purple line, which represents St Louis home prices over a 5-year period, you will see the same pattern is repeated year after year. St Louis home prices increase every year going into spring, typically hitting the peak with sales that close in June, or sometimes July. Then, after peaking, home prices in St Louis start the slow descent downward until hitting the lowest point in January or February, then start the cycle all over again. In normal times, such as the 5 years depicted on the chart below, each spring peaks higher than the spring before and each winter low is higher than the prior winters low.
St Louis 5-County Core Market – Price Per Foot and Time to Sell – Past 5 Years
(Click the chart for live, inter-active chart)
Are St Louis home prices cooling off though?
Now that we’ve reviewed how St Louis home prices fluctuate, lets address whether they are cooling off though. In other words, are St Louis home prices trending downward, indicating they will be rising at lesser rates in the coming months? This is where our proprietary St Louis housing market data software and custom charts come in handy again and make it easy to answer this question. The chart below shows the median price per foot for homes sold in the prior 12 months for each month of the past five years. This is a great chart to use to recognize a trend.
In reviewing the data in the chart below, I first looked at the difference between home prices at the peak versus the trough for each year and found the following:
- 2018 – 15.2%
- 2017 – 12.2%
- 2016 – 13.8%
- 2015 – 16.0%
- 2014 – 19.3%
Next, I looked at the increase in the peak price each year from the prior year and found:
- 2018 from 2017 – 3.8%
- 2017 from 2016 – 4.0%
- 2016 from 2015 – 6.9%
- 2015 from 2014 – 4.5%
From the above, it appears to me the seasonal price swing this year has been fairly consistent with prior years and, while maybe slowing just a little, peak home prices have increased year to year at a fairly consistent rate. The jump from 2015 to 2016, at 6.9% was higher than normal, but the other years are at rates that are close to historical norms. In summary, while the price appreciation may have slowed slightly, which, quite frankly, is probably god so that a reasonable appreciation rate can be maintained, I don’t see any cause for alarm nor any imminent major shift in St Louis home prices at this point.
St Louis 5-County Core Market – Price Per Foot Trend – Past 5 Years
(Click the chart for live, inter-active chart)
