S and P CoreLogic Case-Shiller 20 City Home Price Index November 2019 Year-over-Year Growth Now 2.6%

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 2.2 % to 2.6 %. 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 November than they had done in October”.

• 20 city unadjusted home price rate of growth accelerated by 0.4 % 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:

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:

Homes are in big demand in markets with a fast-growing population. Add in low mortgage rates, family income growth, and a limited inventory of homes for sale and that translates into home-price growth that surpasses overall inflation on other consumer products.

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:

The U.S. housing market was stable in November. With the month’s 3.5% increase in the national composite index, home prices are currently 59% above the trough reached in February 2012, and 15% above their pre-financial crisis peak. November’s results were broad-based, with gains in every city in our 20-city composite.

At a regional level, Phoenix retains the top spot for the sixth consecutive month, with a gain of 5.9% for November. Charlotte and Tampa rose by 5.2% and 5.0% respectively, leading the Southeast region. The Southeast has led all regions since January 2019.”

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 November than they had done in October. This increase was broad-based, reflecting data in 15 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 (November 2019 Data). Per Dr. Frank Nothaft, chief economist at CoreLogic and Frank Martell, president and CEO of CoreLogic stated:

The latest U.S. index shows that the slowdown in home prices we saw in early 2019 ended by late summer. Growth in the U.S. index quickened in November and posted the largest 12-month gain since February. The decline in mortgage rates, down more than one percentage point for fixed-rate loans from November 2018, has supported a rise in sales activity and home prices.

We’re continuing to see a split among older and younger millennials when it comes to their plans to purchase a home. While older millennials are looking forward to participating in the housing market in the future, their younger counterparts don’t see themselves buying a home anytime soon. With home prices expected to rise just over 5% over the next 12 months, affordability remains a concern for most prospective buyers

The National Association of Realtors says (November 2019 data):

Home sales fluctuated a great deal last year. I view 2019 as a neutral year for housing in terms of sales. Home sellers are positioned well, but prospective buyers aren’t as fortunate. Low inventory remains a problem, with first-time buyers affected the most.

Conditions for buying are favorable and will likely continue in 2020. We saw the year come to a close with the economy churning out 2.3 million jobs, mortgage rates below 4% and housing starts ramp up to 1.6 million on an annual basis. If these factors are sustained in 2020, we will see a notable pickup in home sales in 2020.

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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