Written by Steven Hansen
The non-seasonally adjusted Case-Shiller home price index (20 cities) year-over-year rate of home price growth slowed from 5.4 % to 5.2 %. However, the index authors stated “overall, housing is doing quite well”.
- 20 city unadjusted home price rate of growth decelerated 0.2 % month-over-month. [Econintersect uses the change in year-over-year growth from month-to-month to calculate the change in rate of growth]
- Note that Case-Shiller index is an average of the last three months of data.
- The market expected:
| Consensus Range | Consensus | Actual | |
| 20-city, SA – M/M | 0.3 % to 1.3 % | 0.4 % | -0.1 % |
| 20-city, NSA – M/M | +0.9 % | ||
| 20-city, NSA – Yr/Yr | 5.3 % to 6.3 % | 5.6 % | +5.2 % |
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)
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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 prices continue to appreciate across the country. Overall, housing is doing quite well. In addition to strong prices, sales of existing homes reached the highest monthly level since 2007 as construction of new homes showed continuing gains. The SCE Housing Expectations Survey published by the New York Federal Reserve Bank shows that consumers expect home prices to continue rising, though at a somewhat slower pace.
Regional patterns seen in home prices are shifting. Over the last year, the Pacific Northwest has been quite strong while prices in the previously strong spots of San Diego, San Francisco and Los Angeles saw more modest increases. The two hottest areas during the housing boom were Florida and the Southwest. Miami and Tampa have recovered in the last few months while Las Vegas and Phoenix remain weak. When home prices began to recover, New York and Washington saw steady price growth; now both are among the weakest areas in the country.
CoreLogic believes low inventories are spurring rising home prices (May 2016 Data). Per Dr Frank Nothaft, chief economist for CoreLogic and Anand Nallathambi, president and CEO of CoreLogic stated:
Housing remained an oasis of stability in May with home prices rising year over year between 5 percent and 6 percent for 22 consecutive months. The consistently solid growth in home prices has been driven by the highest resale activity in nine years and a still-tight housing inventory.
Price appreciation continues to be fairly broad-based across the U.S. From a regional perspective, the Pacific Northwest continues to be the hottest area for home-price growth, with Oregon and Washington leading the way. The recent turbulence in financial markets should lead to modestly lower mortgage rates, which will provide even more support to the steadily improving real estate recovery.
The National Association of Realtors says home sales prices continue to increase (June 2016 data):
Lawrence Yun, NAR chief economist, says the impressive four month streak of sales gains through June caps off a solid first half of 2016 for the housing market. “Existing sales rose again last month as more traditional buyers and fewer investors were able to close on a home despite many competitive areas with unrelenting supply and demand imbalances,” he said. “Sustained job growth as well as this year’s descent in mortgage rates is undoubtedly driving the appetite for home purchases.”
Cautions Yun, “Looking ahead, it’s unclear if this current sales pace can further accelerate as record high stock prices, near-record low mortgage rates and solid job gains face off against a dearth of homes available for sale and lofty home prices that keep advancing.”
“The modest bump in June sales to first-time buyers can be attributed to mortgage rates near all-time lows and perhaps a hopeful indication that more affordable, lower-priced homes are beginning to make their way onto the market,” adds Yun. “The odds of closing on a home are definitely higher right now for first-time buyers living in metro areas with tamer price growth and greater entry-level supply — particularly areas in the Midwest and parts of the South.”
NAR President Tom Salomone says Realtors® are thrilled that the U.S. Senate last week unanimously voted to pass H.R. 3700, the Housing Opportunity Through Modernization Act. “At a time of historically low mortgage rates, this is a huge win for prospective first-time and low- to moderate-income buyers interested in purchasing a condo,” he said. “Eliminating overly burdensome restrictions on condos will help more of these prospective buyers access financing and take advantage of this affordable entry point into homeownership.”
Black Knight Financial Services (formerly known as Lender Processing Services) May 2016 home price index Up 1.1 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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