Written by Steven Hansen
The non-seasonally adjusted S And P CoreLogic Case-Shiller home price index (20 cities) year-over-year rate of home price growth improved from 2.1 % to 2.2 %. The index authors stated, “As was the case last month, after a long period of decelerating price increases, the national, 10-city, and 20-city composites all rose at a modestly faster rate in October compared to September”.
Analyst Opinion of Case-Shiller HPI
All home price indices are now showing home price growth is accelerating year-over-year.
- 20 city unadjusted home price rate of growth accelerated by 0.2 % month-over-month. [Econintersect uses the change in year-over-year growth from month-to-month to calculate the change in the rate of growth]
- Note that the Case-Shiller index is an average of the last three months of data.
- The market expected from Econoday: [not updated yet]
Consensus Range | Consensus | Actual | |
20-city, SA – M/M | 0.2 % to 0.3 % | +0.3 % | +0.5 % |
20-city, NSA – M/M | +0.1 % | ||
20-city, NSA – Yr/Yr | 1.7 % to 2.5 % | +2.0 % | +2.2 % |
S&P/Case-Shiller Home Price Indices Year-over-Year Change
Comparing the NAR and Case-Shiller 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 stabilize (rate of growth not rising or falling).
There are some differences between the indices on the rate of “recovery” of home prices.
When asked what today’s release means for the housing market, Dr. Frank Nothaft, chief economist for CoreLogic said:
The latest S&P CoreLogic Case-Shiller National and Composite indexes confirm that the slowdown in home-price growth that we saw early in 2019 ended in late summer. Annual growth in the National index quickened for the second straight month in October and the 20-city and 10-city indexes also had a pickup in their 12-month growth rate. The decline in mortgage rates, down about one percentage point for fixed-rate loans from one year ago, has supported a rise in sales activity and home prices.
Price trends varied across cities depending in part on affordability constraints and population growth pressures. High-cost markets, where the lack of affordable housing remains a critical issue, had the largest deceleration in price growth from one-year ago, with prices declining in San Francisco on an annual basis for the third month in a row. Of the cities in the Composite index, Phoenix and Tampa top the list of annual appreciation, reflecting rising demand from strong population growth in Arizona and Florida.
A synopsis of Authors of the Leading Indices:
Case Shiller’s Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices stated:
October’s U.S. housing data continue to be reassuring. With October’s 3.3% increase in the national composite index, home prices are currently more than 15% above the pre-financial crisis peak reached July 2006. October’s results were broad-based, as both our 10- and 20-city composites rose. Of the 20 cities in the composite, only San Francisco saw a year-over-year price decline in October.
At a regional level, Phoenix retains the top spot for the fifth consecutive month with October’s 5.8% year-over-year gain. The Southeast region was also strong, as Tampa, Charlotte, and Atlanta all rose by more than 4.0%
As was the case last month, after a long period of decelerating price increases, the national, 10-city, and 20-city composites all rose at a modestly faster rate in October compared to September. This stability was broad-based, reflecting data in 12 of 20 cities. It is, of course, still too soon to say whether this marks an end to the deceleration or is merely a pause in the longer-term trend.
CoreLogic believes affordability is now improving (October 2019 Data). Per Dr. Frank Nothaft, chief economist at CoreLogic and Frank Martell, president and CEO of CoreLogic stated:
Local home-price growth can deviate widely from the change in our U.S. index. While we saw prices up 3.5% nationally last year, home prices also declined in 22 metropolitan areas. Price softness occurred in some high-cost urban areas and in metros with weak employment growth during the past year.
Nationally, over the past year, home prices are up 3.5% with the rate of growth accelerating from September into October. We expect home prices to rise at least another 5% over the next 12 months. Interestingly, this persistent increase in home prices isn’t deterring older millennials. In fact, 25% of those surveyed anticipate purchasing a home over the next six to eight months.
The National Association of Realtors says (November 2019 data):
The new home construction seems to be coming to the market, but we are still not seeing the amount of construction needed to solve the housing shortage,” Yun said. “It is time for builders to be innovative and creative, possibly incorporating more factory-made modules to make houses affordable rather than building homes all on-site.”
Yun cited last week’s NAR Real Estate Forecast Summit, in which 14 leading housing and financial industry economists predicted that the U.S. will likely avoid a recession in 2020 while projecting the economy to grow 2% in the coming year.
“The consensus was that mortgage rates may rise, but only incrementally,” Yun said. “I expect to see home price affordability improvements, too. This year we witnessed housing costs grow faster than income, but the expectation is for prices to settle at a more reasonable level in the coming year in line with average hourly wage growth of 3% on a year-over-year basis.”
“I would encourage would-be buyers to take advantage of historically-low mortgage rates, which make a home purchase more affordable, particularly when home prices are rising,” said NAR President Vince Malta, broker at Malta & Co., Inc., in San Francisco, California.
The U.S. Federal Housing Finance Agency produces an All-Transactions House Price Index for the United States:
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 in the graph below.
Comparing Various Home Price Indices to Owner’s Equity (blue line)
The affordability factor favors rental vs owning.
Price to Rent Ratio – Indexed on January 2000 – Based on Case-Shiller 20 cities index ratio to CPI Rent Index
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