In June 2025, the Case Schiller home price index showed a month-on-month decrease of 0.3%, slightly above the estimated -0.2%. Year-on-year, home prices increased by 2.1%, aligning with predictions, but down from the 2.8% increase seen in the previous month.
New York City experienced the most pronounced year-on-year change at 7.03%, whereas Tampa faced the greatest decrease at -2.38%. Monthly changes varied across cities, with Chicago showing the largest increase at 1.03% and San Francisco the biggest decrease at -1.05%.
Cities With Positive Month-On-Month Growth
Cities with positive month-on-month growth included Minneapolis at 0.67%, Detroit at 0.58%, and Charlotte at 0.47%. Conversely, cities like Seattle, Los Angeles, and Washington experienced decreases, with Los Angeles falling by 0.43% and Washington by 0.52%.
Year-on-year, other cities with notable increases were Chicago at 6.09% and Cleveland at 4.47%. Meanwhile, Denver, San Diego, and Dallas observed year-on-year declines with Dallas at -0.95% and San Francisco seeing a downturn of -1.98%. Tampa had the lowest year-on-year change at -2.38%.
The home price data from June 2025 confirmed a month-over-month price drop that was slightly worse than we anticipated. This reinforces the view that the housing market’s momentum is fading after a period of slowing growth. For us, this suggests the path of least resistance for housing-related assets is now lower in the weeks ahead.
This older June data is supported by more recent reports we have seen throughout August. July’s existing home sales fell by 3.5%, and housing inventory has climbed to 4.1 months of supply, the highest level we have seen since 2019. Persistently high 30-year mortgage rates, which have ticked back up to around 7.2%, continue to pressure affordability and dampen buyer demand.
The Broader Economic Picture
The broader economic picture isn’t offering any relief for the housing sector, which will likely influence Federal Reserve thinking. With the most recent July CPI report showing core inflation remains sticky at 3.8%, we do not expect the Fed to signal rate cuts anytime soon. This policy stance will likely keep borrowing costs elevated, acting as a continued headwind for home prices through the autumn.
Given this, we should look at bearish positions on homebuilder ETFs like ITB and XHB. The significant weakness in formerly hot markets like San Francisco, Phoenix, and Tampa is a strong signal that builder margins and order books will face pressure. We can express this view by buying put options on these ETFs, anticipating a drop in their stock prices as this negative sentiment builds.
The data also shows a clear split, with cities like Chicago and New York holding up surprisingly well while others like San Francisco see sharp monthly declines. This divergence suggests a pairs trading strategy could be effective. We could consider positions that short a basket of companies exposed to the declining West Coast and Sun Belt regions while hedging with longs tied to more resilient Midwestern markets.
Finally, the accelerating decline in year-over-year price growth, from 2.8% down to 2.1%, points to increasing market uncertainty and potential volatility. This makes options that benefit from sharp price moves, such as straddles on the XHB homebuilder ETF, an attractive strategy. It allows us to profit from a significant move in either direction as the market digests this clear slowing trend.
