S and P CoreLogic Case-Shiller 20 City Home Price Index October 2020 Year-over-Year Growth Continues To Accelerate

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 continues to accelerate. The index authors stated, “Since June, our monthly readings have shown accelerating growth in home prices, and October’s results emphatically emphasize that trend”.

• 20 city unadjusted home price rate of growth accelerated by 1.3 % 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 is now accelerating.

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 Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices stated:

The surprising strength we noted in last month’s report continued into October’s home price data. The National Composite Index gained 8.4% relative to its level a year ago, accelerating from September’s 7.0% increase. The 10- and 20-City Composites (up 7.5% and 7.9%, respectively) also rose more rapidly in October than they had done in September. The housing market’s strength was once again broadly-based: all 19 cities for which we have October data rose, and all 19 gained more in the 12 months ended in October than they had gained in the 12 months ended in September

We’ve noted before that a trend of accelerating increases in the National Composite Index began in August 2019 but was interrupted in May and June, as COVID-related restrictions produced modestlydecelerating price gains. Since June, our monthly readings have shown accelerating growth in home prices, and October’s results emphatically emphasize that trend. The last time that the National Composite matched this month’s 8.4% growth rate was more than six and a half years ago, in March 2014. Although the full history of the pandemic’s impact on housing prices is yet to be written, the data from the last several months are consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes. We’ll continue to monitor what the data can tell us about this question.

Phoenix’s 12.7% increase led all cities for the 17 th consecutive month. Seattle (11.7%) and San Diego (11.6%) repeated in second and third place. Prices were strongest in the West and Southwest regions, but even the comparatively weak Midwest and Northeast (up 7.7% and 7.9% respectively) performed creditably well.

CoreLogic believes home demand will remain firm moving forward (October 2020 Data). Per Dr. Frank Nothaft, chief economist at CoreLogic stated:

Home buyers have been spurred by record-low mortgage rates and an urgency to buy or upgrade to more space, especially as much of the American workforce continues to work from home. First-time buyers in particular should remain a big part of next year’s home purchases, as the largest wave of millennials is heading into prime home-buying years.

The pandemic has shifted home buyer interest toward detached rather than attached homes. Detached homes offer more living space and are typically located in less densely populated neighborhoods. And while prices of single-family detached homes posted an annual increase of 7.9% in October, the price of attached homes rose only 4.5% year over year.”

From the National Association of Realtors (November 2020 data):

Home sales in November took a marginal step back, but sales for all of 2020 are already on pace to surpass last year’s levels. Given the COVID-19 pandemic, it’s amazing that the housing sector is outperforming expectations.

Job recoveries have stalled in the past few months, and fast-rising coronavirus cases along with stricter lockdowns have weakened consumer confidence.

Circumstances are far from being back to the pre-pandemic normal. However, the latest stimulus package and with the vaccine distribution underway, and a very strong demand for homeownership still prevalent, robust growth is forthcoming for 2021.

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 by 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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