Annual home price inflation continued its smooth downward trajectory in October, suggesting home price inflation continues to cool, the S&P Case-Shiller home price index shows.

The 20-city Case-Shiller home price index rose 4.2 percent in October from a year ago, very close to the 4.3 percent Econoday consensus forecast, and down from 4.6 percent in September and 5.2 percent in August.

The seasonally adjusted index was up 0.3 percent in October on the month, close to the 0.2 percent consensus. Not seasonally adjusted, the index declined by 0.2 percent.

The national indexes showed similar slowing in price rises with a 3.6 percent increase in October from a year ago, down from 3.9 percent in September. The 10-city index saw an annual increase of 4.8 percent, down from a 5.2 percent annual increase in the previous month.

Among cities, New York saw the fastest annual increase at 7.3 percent, followed by Chicago at 6.2 percent and Las Vegas at 5.9 percent.

Case-Shiller has been depicting a gradual slowing in the rate of annual home price inflation with the 20-city composite index up 4.6 percent in September, down from 5.2 percent in August and 5.9 percent in July. Forecasters now look for more slowing to 4.3 percent in October. The consensus also looks for a moderate 0.2 percent increase on the month after a 0.2 percent increase in September.

The S&P Corelogic Case-Shiller home price index tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the nation. Composite indexes and regional indexes measure changes in existing home prices and are based on single-family home resales. Condominiums and co-ops are excluded as is new construction. Note that forecasters, in line with recommendations from Standard & Poor's questioning the accuracy of seasonal adjustments, track both seasonally adjusted and not seasonally adjusted monthly data for this indicator.

Home values affect much in the economy - especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can dampen housing starts. Changes in home values, and the ability to draw upon expanding lines of home equity loans, play key roles in consumer spending and in consumer financial health.

Beginning with the onset of the subprime credit crunch in mid-2007 and with it a downturn in home prices, the ability of borrowers to refinance their debt into affordable fixed rate mortgages was sharply constrained. This in turn limited aggregate consumer spending and contributed to the depth of the Great Recession. From their peak in late 2006 and early 2007 to their nadir in mid-2012, Case-Shiller's home price indexes fell nearly 50 percent. The subsequent recovery proved slow but steady with the indexes finally surpassing their prior highs in early 2018.