Case-Shiller Home Prices July 2014: Price Growth Continues to Slow, Growth Rate Again Well Under Expectations

September 30th, 2014
in aa syndication, home sales and home prices

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The non-seasonally adjusted Case-Shiller home price index (20 cities) for July 2014 (released today) rate of growth again declined sharply but still shows reasonable year-over-year gain in housing prices.

Follow up:


  • 20 city unadjusted home price rate of growth decelerated 1.3% month-over-month. [Econintersect uses the change in year-over-year growth from month-to-month to calculate the change in rate of growth]
  • Case-Shiller no longer shows the highest year-over-year home price gains of any home price index - this honor now goes to CoreLogic.
  • The market expected:
  Consensus Range Consensus Actual
20-city, SA - M/M -0.3 % to 0.2 %  0.1 % -0.5% 
20-city, NSA - M/M 0.5 % to 1.3 % 1.3 % 0.6% 
20-city, NSA - Yr/Yr 6.8 % to 7.8 % 7.5 % 6.7% 

S&P/Case-Shiller Home Price Indices Year-over-Year Change

Comparing all the home price indices, it needs to be understood each of the indices uses a unique methodology in compiling their index – and no index is perfect. The National Association of Realtors normally shows exaggerated movements which likely is due to inclusion of more higher value homes.

Comparison of Home Price Indices – Case-Shiller 3 Month Average (blue line, left axis), CoreLogic (green line, left axis) and National Association of Realtors 3 Month Average (red line, right axis)

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The way to understand the dynamics of home prices is to watch the direction of the rate of change. Here home price growth generally appears to be stabilizing (rate of growth not rising or falling).

Year-over-Year Price Change Home Price Indices – Case-Shiller 3 Month Average (blue bar), CoreLogic (yellow bar) and National Association of Realtors 3 Month Average (red bar)

/images/z existing5.PNG

There are some differences between the indices on the rate of “recovery” of home prices. 

A synopsis of Authors of the Leading Indices:

Case Shiller’s David M. Blitzer, Chairman of the Index Committee at S&P Indices:

The broad-based deceleration in home prices continued in the most recent data. However, home prices continue to rise at two to three times the rate of inflation. The slower pace of home price appreciation is consistent with most of the other housing data on housing starts and home sales. The rise in August new home sales -- which are not covered by the S&P/Case-Shiller indices – is a welcome exception to recent trends

The 10- and 20-City Composites gained 6.7% annually with prices nationally rising at a slower pace of 5.6%. Las Vegas, one of the most depressed housing markets in the recession, is still leading the cities with 12.8% year-over-year. Phoenix, the first city to see double-digit gains back in 2012, posted its lowest annual return of 5.7% since February 2012.

While the year-over-year figures are trending downward, home prices are still rising month-to-month although at a slower rate than what we are used to seeing over the past couple of years. The National Index rose 0.5%, its seventh consecutive increase. At the bottom was San Francisco with its first decline this year and the only city in the red. New York tended to underperform over the past few years but it was on top for the last two months.

CoreLogic believes home price growth is slowing (July Data). Per Sam Khater, deputy chief economist for CoreLogic and Anand Nallathambi, president and CEO of CoreLogic:

While home prices have clearly moderated nationwide since the spring, the geographic drivers of price increases are shifting. Entering this year, price increases were led by western and southern states, but over the last few months northeastern and midwestern states are migrating to the forefront of home price rankings.

Home prices continued to march higher across much of the U.S. in July. Most states are reaching price levels not seen since the boom year of 2006. Our data indicates that this trend will continue, with more states hitting new all-time peaks this year and into 2015 as the recovery continues.

The National Association of Realtors says cash buyers disappearing (August 2014 data). Per Lawrence Yun , NAR chief economist and Steve Brown, NAR President:

Lawrence Yun, NAR chief economist, says sales activity remains stronger than earlier in the year, but fell last month as investors stepped away. "There was a marked decline in all-cash sales from investors,” he said. "On the positive side, first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country.”

Yun adds, "As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying.”

NAR President Steve Brown says a gradual decline in investor activity, many who pay in cash, is good for the market and creates more opportunity for buyers who rely on financing to purchase a home.

Black Knight Financial Services (formerly known as Lender Processing Services) July 2014 home price index up 0.2% for the Month; Up 5.1% Year-over-Year.

Econintersect publishes knowledgeable views of the housing market.

Caveats on the Use of Home Price Indices

The housing price decline seen since 2005 varies by zip code – and seems to have ended somewhere around the beginning of the 2Q2012. Every area of the country has differing characteristics. Since January 2006, the housing declines in Charlotte and Denver are well less than 10%, while Las Vegas home prices had declined almost 60%.

Each home price index uses a different methodology – and this creates slightly different answers. There is some evidence in various home price indices that home prices are beginning to stabilize – the evidence is also in this post. Please see the post Economic Headwinds from Real Estate Moderate.

The most broadly based index is the US Federal Housing Finance Agency’s House Price Index (HPI) – a quarterly broad measure of the movement of single-family house prices. This index is a weighted, repeat-sales index on the same properties in 363 metro centers, compared to the 20 cities Case-Shiller.

The US Federal Housing Finance Agency also has an index (HPIPONM226S) based on 6,000,000 same home sales – a much broader index than Case-Shiller. Also, there is a big difference between home prices and owner’s equity (OEHRENWBSHNO) which has been included on the graph below.

Comparing Various Home Price Indices to Owner’s Equity (blue line)

With rents increasing and home prices declining – the affordability factor favoring rental vs owning is reversing. Rising rents are shifting the balance.

Price to Rent Ratio – Indexed on January 2000 – Based on Case-Shiller 20 cities index ratio to CPI Rent Index

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