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

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The non-seasonally adjusted Case-Shiller home price index (20 cities) for June 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 continues to show the highest year-over-year home price gains of any home price index.
  • The market expected:
  Consensus Range Consensus Actual
20-city, SA - M/M -0.5 % to 0.2 %  0.1 % -0.2% 
20-city, NSA - Yr/Yr 7.8 % to 9.0 %  8.4 % 8.1% 

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 is now decelerating.

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:

Home price gains continue to ease as they have since last fall,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “For the first time since February 2008, all cities showed lower annual rates than the previous month. Other housing indicators – starts, existing home sales and builders’ sentiment – are positive. Taken together, these point to a more normal housing sector.

The monthly National Index rose 0.9% in June. While all 20 cities saw higher home prices over the last 12 months, all experienced slower gains. In San Francisco, the pace of price increases halved since late last summer. The Sun Belt cities – Las Vegas, Phoenix, Miami and Tampa – all remain a third or more below their peak prices set almost a decade ago.

Bargain basement mortgage rates won’t continue forever; recent improvements in the labor markets and comments from Fed chair Janet Yellen and others hint that interest rates could rise as soon as the first quarter of 2015. Rising mortgage rates won’t send housing into a tailspin, but will further dampen price gains.

CoreLogic believes home price growth is slowing (June Data). Per Mark Fleming, chief economist for CoreLogic and Anand Nallathambi, president and CEO of CoreLogic:

Home price appreciation continued moderating in June with its slight month-over-month increase. This reversion to normality that we are finally experiencing is expected to continue across the country and should further alleviate concern over diminishing affordability and the risk of another asset bubble.

Home prices are continuing to rise fueled by ongoing tight supply, low rates and aggressive investor buying on the East and West Coasts. The expected surge in the number of homes for sale has not materialized to date as many homeowners are staying put and waiting for better economic times and higher prices in the future.

The National Association of Realtors continue to live in their world of hype (July 2014 data). Per Lawrence Yun , NAR chief economist and Steve Brown, NAR President:

Lawrence Yun, NAR chief economist, says sales momentum is slowly building behind stronger job growth and improving inventory conditions. “The number of houses for sale is higher than a year ago and tamer price increases are giving prospective buyers less hesitation about entering the market,” he said. “More people are buying homes compared to earlier in the year and this trend should continue with interest rates remaining low and apartment rents on the rise.” Yun does warn that affordability is likely to decline in upcoming years. “Although interest rates have fallen in recent months, median family incomes are still lagging behind price gains, and mortgage rates will inevitably rise with the upcoming changes in monetary policy,” he said.

NAR President Steve Brown says the new credit scoring calculation recently announced by Fair Isaac Corp., or FICO, will improve access to homeownership. “NAR supports efforts to broaden access to credit for qualified homebuyers, especially those who have been shut out of the housing market or forced to pay higher interest rates because of flawed credit scores,” he said. “A solid credit score is necessary to keep borrowing costs down.”

Black Knight Financial Services (formerly known as Lender Processing Services) June 2014 home price index up 0.8% for the Month; Up 5.5% 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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