Case-Shiller Home Prices September 2014: Price Growth Continues to Decelerate

November 25th, 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 September 2014 (released today) rate of growth again declined but continues to show moderate year-over-year gain in housing prices.

Follow up:


  • 20 city unadjusted home price rate of growth decelerated 0.7% 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" goes to CoreLogic.
  • The market expected:
  Consensus Range Consensus Actual
20-city, SA - M/M -0.4 % to 0.4 %  +0.3 % +0.4% 
20-city, NSA - M/M -0.3 % to 0.4 % -0.1 % 0.0% 
20-city, NSA - Yr/Yr 4.4 % to 5.4 % 4.7 % 4.9% 

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 overall trend in home price increases continues to slow down. The National Index reported a month-over-month decrease for the first time since November 2013. The Northeast region reported its first negative monthly returns since December 2013 and its worst annual returns since December 2012 due to weaknesses in Washington D.C. and Boston. The West and Southwest, previously strong regions, are seeing price gains fade. The only region showing any sustained strength is the Southeast led by Florida; price gains are also evident in Atlanta and Charlotte.

The 10- and 20-City Composites continued their year-over-year downward trend, gaining 4.8% and 4.9% compared to last month’s year-over-year gains of 5.6%. Las Vegas, which has shown double digit annual gains, posted an annual return of 9.1%, its first time below 10% since October 2012. Miami, however, continues to impress with another double digit annual gain of 10.3%. It is the only city that currently has a year-over-year double digit gain. Charlotte was the only city in September to show an annual increase relative to last month. Eighteen of the 20 cities reported slower annual gains compared to last month.

Other housing statistics paint a mixed to slightly positive picture. Housing starts held above one million at annual rates on gains in single family homes, sales of existing homes are gaining, builders’ sentiment is improving, foreclosures continue to be worked off and mortgage default rates are at precrisis levels. With the economy looking better than a year ago, the housing outlook for 2015 is stable to slightly better.”

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

There has been a clear bifurcation in home price growth for lower-end versus upper-end properties in 2014. As of December 2013, both lower-end and upper-end property prices were up 9.7 percent on a year over year basis. As of September, lower-end prices were up 9.4 percent but upper-end prices were up only 4.5 percent

Home prices continue to rise compared with this time last year but the rate of growth is clearly slowing as we exit 2014. With more positive macro-economic trends emerging in the U.S., we are forecasting moderate price growth for 2015

The National Association of Realtors says home sales growth is improving (October 2014 data):

Lawrence Yun, NAR chief economist, says the housing market this year has been a tale of two halves. “Sales activity in October reached its highest annual pace of the year as buyers continue to be encouraged by interest rates at lows not seen since last summer, improving levels of inventory and stabilizing price growth,” he said. “Furthermore, the job market has shown continued strength in the past six months. This bodes well for solid demand to close out the year and the likelihood of additional months of year-over-year sales increases.”

“The growth in housing supply this year will likely prevent the drastic sales slowdown and coinciding spike in home prices we saw last winter due to low inventory,” says Yun. “However, more housing starts are needed to increase supply, meet current demand and keep price growth in check.””

“Although distressed sales are trending downward, there are still areas (such as judicial states Florida, Maryland and New York) plagued by foreclosures, and homeowners faced with the awful choice between a tax bill they are unable to pay and losing their home,” says NAR President Chris Polychron, and urges the U.S. House to schedule a vote on “The Mortgage Forgiveness Tax Relief Act,” as soon as possible. This bipartisan legislation would extend an expired provision that has helped millions of distressed American families by allowing tax relief when lenders forgive a portion of the mortgage debt they owe.”

Black Knight Financial Services (formerly known as Lender Processing Services) September 2014 home price index up 0.0% for the Month; Up 4.6% 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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