Case-Shiller home prices up 1.9% in July, but 12 of 19 metros slipped on the month and real prices fell again

U.S. home prices rose 1.9% in the year to July, up from 1.6% in June, according to the S&P Cotality Case-Shiller National Index released Tuesday by S&P Dow Jones Indices. The 20-City Composite rose 2.5% and the 10-City Composite 3.4%, both faster than a month earlier.

With consumer prices up 3.4% over the same year, S&P said home prices fell in real terms for the 14th month in a row, though the gap narrowed. By our arithmetic, a 1.9% nominal gain against 3.4% inflation is a real decline of about 1.5%.

The number behind the headline

The annual rate sped up, but July itself was nearly flat. Before seasonal adjustment the national index rose 0.12% on the month and the 20-City Composite slipped 0.01%. Of the 19 metros with July data (Detroit was left out because of recording delays in Wayne County), 12 fell on the month on that basis, including Boston, Dallas, Los Angeles, San Francisco, Seattle and Washington, according to the release tables.

S&P's Rebecca Kaufman called it "a notable departure from typical seasonal patterns" and said seasonal factors "weighed heavily" on July. After seasonal adjustment, the national index rose 0.3% and only four metros declined: Atlanta, Charlotte, Las Vegas and Tampa. So the honest reading is that the underlying trend is still slightly up, but the summer selling season delivered much less than it normally does.

East up, West down

Six of the 19 reporting metros are now below their year-ago prices: Dallas, Denver, Las Vegas, Portland, Seattle and Tampa. Chicago has led for five straight months. S&P said six of the eight Eastern markets posted a bigger annual change in July than in June, against two of the eight Western ones.

This morning's FHFA index, which tracks only homes with Fannie Mae and Freddie Mac mortgages, showed a firmer 2.6% annual gain for July; our FHFA story is here. Both point the same way: gains concentrated in the East and Midwest, the weakest readings in the West.

What it means for a buyer this fall

Falling real prices do not mean homes are getting cheaper to buy, because the loan costs more. Freddie Mac's weekly survey put the 30-year fixed rate at 7.03% on September 24, against 6.30% a year earlier, according to its published history. On a $400,000 loan, principal and interest comes to about $2,669 a month now versus about $2,476 then, roughly $193 more. Add a year of 1.9% price growth to the loan size and the gap is about $244 a month.

Someone closing in Seattle, Denver or Dallas is borrowing against a price that is lower than a year ago, which offsets part of that rate increase. In Chicago or New York, buyers are paying more for both the house and the money. Rates have risen further since the September 24 survey; we covered a daily index reaching 7.50% here, and the 10-year Treasury that drives them is on our chart page.

Sources: S&P Dow Jones Indices; HousingWire; Freddie Mac. Metro counts, real-price change and payment figures are our calculations. This is market information, not investment advice.