posted on 28 March 2017
Written by Steven Hansen
The non-seasonally adjusted Case-Shiller home price index (20 cities) year-over-year rate of home price growth improved to 5.7 %. The index authors stated "The prices also hurt affordability as higher prices and mortgage rates shrink the number of households that can afford to buy at current price levels. At some point, this process will force prices to level off and decline - however we don't appear to be there yet.".
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 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 stabilize (rate of growth not rising or falling).
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:
CoreLogic believes low inventories are spurring rising home prices (January 2017 Data). Per Dr Frank Nothaft, chief economist for CoreLogic and Frank Martell, president and CEO of CoreLogic stated:
The National Association of Realtors says home sales prices continue to increase (February 2017 data):
Black Knight Financial Services (formerly known as Lender Processing Services) January 2017 home price index Up 0.1 Percent for the Month; Up 5.4 Percent Year-Over-Year. Note that Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.
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.
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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