Does a Housing Price Dip Signal a Market Rally?

Contributing Editor

Aug 28, 2024

Reviewed by: etf.com Staff

Edited by: Kent Thune

June home prices rose at a lesser pace than they had been in recent months but remained high, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, a widely watched measure of housing markets.

The index, which covers nine geographic areas in the U.S., reported a 5.4% annual increase last month, down from a 5.9% annual gain in May.

“The S&P CoreLogic Case-Shiller Indices continue to show above-trend real price performance when accounting for inflation,” says Brian D. Luke, CFA, Head of Commodities, Real & Digital Assets.

Luke noted consumers’ concerns about their ability to purchase homes amid ongoing inflationary pressure and high mortgage rates—and despite recent declines in both economic indicators and the likelihood of a U.S. central bank interest rate cut. Housing affordability has become a central issue in this year's heated presidential election.

“Home prices and inflation continue to factor into the political agenda coming into the election season,” he said. “While both housing and inflation have slowed, the gap between the two is larger than historical norms, with our National Index averaging 2.8% more than the Consumer Price Index (CPI). That is a full percentage point above the 50-year average."

VNQ, IYR Tick Upward

The CPI dipped below 3% for the first time since March 2021, a marked improvement from highs above 9% just two years ago but still higher than the U.S. central bank's target 2% inflation rate. The CME FedWatch tool is forecasting a 66% probability that the Federal Reserve will chop interest rates by 25 basis points at its next meeting in September—its first cut since 2021.

Among leading real estate-focused ETFs, the $35.8 billion in assets Vanguard Real Estate ETF (VNQ), which tracks an index of U.S. real estate companies, ticked up in Tuesday trading. The $4.4 billion in AUM iShares U.S. Real Estate ETF (IYR), which covers firms in the industry and real estate investment trusts (REITS), and iShares Residential Residential and Multisector Real Estate ETF (REZ), which covers healthcare, residential and specialized REITS, also rose.

VNQ and IYR have climbed 7.6% and 6.4% year-to-date. REZ has jumped almost 16% over the same period.

James Rubin

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James Rubin is a contributing editor for etf.com, where he produces the Morning Exchange and Weekly Exchange newsletters. A longtime financial writer, editor and book author, he formerly held positions as a news and markets editor for the Americas at CoinDesk, where he focussed on cryptocurrencies.

He provided editorial guidance for a Wall Street Journal best-selling book on Bitcoin and oversaw a startup newsroom focused on digital financial assets. He has edited for TheStreet and Unchained, where he wrote daily news stories about the trial of fallen crypto entrepreneur Sam Bankman-Fried. His writing has also appeared in The Hollywood Reporter, Forbes.com, AdWeek, Bankrate, The Financial Brand and The Wall Street Journal. He has also written for Forbes Insights and the Economist Intelligence Unit, including papers presented at World Economic Forums in Davos and Mumbai.

James is the co-author of The Urban Cyclist’s Survival Guide (Triumph Books) and has been interviewed about bike safety on a number of NPR affiliates. In a prior career, Rubin was a world-ranked tennis player, once competing in Wimbledon’s qualifying rounds. He speaks fluent German and is a graduate of the Columbia University Graduate School of Journalism and received his BA at Columbia University.

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