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. The index authors stated, “February’s results into historical context – The National Composite’s 12.0% gain is the highest recorded since February 2006, exactly 15 years ago, and lies comfortably in the top decile of historical performance.”.
Analyst Opinion of Case-Shiller HPI
All home price indices are now showing home price growth is continuing year-over-year. At this point, the pandemic has little affected home prices (or sales for that matter).
- 20 city unadjusted home price rate of growth accelerated by 0.8 % 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:
| Consensus Range | Consensus | Actual | |
| 20-city, SA – M/M | 1.0 % to 1.1 % | +1.1 % | +1.2 % |
| 20-city, NSA – M/M | 0.8 % to 1.1 % | +0.8 % | +1.2 % |
| 20-city, NSA – Yr/Yr | 11.2 % to 11.9 % | +11.8 % | +11.9 % |
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:
Strong home price gains continued in February 2021. The National Composite Index marked its ninth month of accelerating prices with a 12.0% gain from year-ago levels, up from 11.2% in January. This acceleration is also reflected in the 10- and 20-City Composites (up 11.7% and 11.9%, respectively). The market’s strength continues to be broadly-based: all 20 cities rose, and 19 cities gained more in the 12 months ended in February than they had gained in the 12 months ended in January. More than 30 years of S&P CoreLogic Case-Shiller data help us to put February’s results into historical context. The National Composite’s 12.0% gain is the highest recorded since February 2006, exactly 15 years ago, and lies comfortably in the top decile of historical performance. Housing’s strength is reflected across all 20 cities; February’s price gains in every city are above that city’s median level, and rank in the top quartile of all reports in 18 cities. These data remain consistent with the hypothesis that COVID has encouraged potential buyers to move from urban apartments to suburban homes. This demand may represent buyers who accelerated purchases that would have happened anyway over the next several years. Alternatively, there may have been a secular change in preferences, leading to a permanent shift in the demand curve for housing. Future data will be required to analyze this question. “Phoenix’s 17.4% increase led all cities for the 21st consecutive month, with San Diego (+17.0%) and Seattle (+15.4%) close behind. Although prices were strongest in the West (+13.0%) and Southwest (+12.9%), every region logged double-digit gains.
CoreLogic believes home demand will remain firm moving forward (February 2021 Data). Per Dr. Frank Nothaft, chief economist at CoreLogic and Frank Martell, president and CEO of CoreLogic stated:
The run-up in home prices is good news for current homeowners but sobering for prospective buyers. Those looking to buy need to save for a down payment, closing costs and cash reserves, all of which are much higher as home prices go up. Add to that a rise in mortgage rates and the affordability challenge for first-time buyers becomes even greater.
Homebuyers are experiencing the most competitive housing market we’ve seen since the Great Recession. Rising mortgage rates and severe supply constraints are pushing already-overheated home prices out of reach for some prospective buyers, especially in more expensive metro areas. As affordability challenges persist, we may see more potential homebuyers priced out of the market and a possible slowing of price growth on the horizon.
From the National Association of Realtors (February 2021 data):
Consumers are facing much higher home prices, rising mortgage rates, and falling affordability, however, buyers are still actively in the market.
The sales for March would have been measurably higher, had there been more inventory. Days-on-market are swift, multiple offers are prevalent, and buyer confidence is rising.
Although mortgage rates have risen a tick, they are still at a favorable level and the economic outlook is promising.
At least half of the adult population has received a COVID-19 vaccination, according to reports, and recent housing starts and job creation data show encouraging dynamics of more supply and strong demand in the housing sector.
Without an increase in supply, the society wealth division will widen with homeowners enjoying sizable equity gains while renters will struggle to become homeowners,
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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