Submitted by Christophe Barraud

At 9am, the S&P CoreLogic Case-Shiller Home Price Indexes for September will be released. As a reminder, they are calculated monthly using a three-month moving average and are published with a two-month lag at 9 am EST on the last Tuesday of every month. According to the Bloomberg consensus, the main index (20-City Composite) is expected to increase by 5.30% YoY, up from 5.18% YoY in August.

• Other indexes, already released for September, suggest that an upward surprise is likely.
• It would be coherent with the ongoing improvement of fundamentals:
  • Buyers kept on benefiting from favorable market conditions with mortgage rates reaching the lowest level on record
  • Demand for second homes skyrocketed amid pandemic
  • Housing supply remained limited

1. Demand was resilient with mortgage rates falling to a record low for 13th time this year

Most of housing reports published over the period [July-September] confirmed that housing demand remained resilient and supported by low mortgage rates. This positive momentum should continue in the coming month in a context where, according to Freddie Mac, the average cost of a 30-year fixed-rate mortgage dropped to a new record low of 2.72 percent last week. It was the lowest in data going back almost 50 years.

2. Demand for second homes skyrocketed amid pandemic

In the meantime, Redfin highlighted that “in October, demand for second homes skyrocketed 100% from a year earlier—the fourth triple-digit increase in the last five months.” Redfin lead economist Taylor Marr noted that “with mortgage rates at all-time lows and offices shut down across the country, the dream of having a second home outside of the city is becoming a reality for many wealthy Americans.”

3. The lack of inventory also supported prices

In this context, in its October report, the National Association of Realtors reported that “total housing inventory at the end of October totaled 1.42 million units, down 2.7% from September and down 19.8% from one year ago (1.77 million). Unsold inventory sits at an all-time low 2.5-month supply at the current sales pace, down from 2.7 months in September and down from the 3.9-month figure recorded in October 2019.”