Is Case-Shiller Improvement Any More Than a Seasonal Bounce?

With the release of Case-Shiller data, Econintersect summarizes all home price indices for its readers. Case-Shiller is showing a normal seasonal improvement between March and April 2011:

Data through April 2011, released today by S&P Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show a monthly increase in prices for the 10- and 20-City Composites for the first time in eight months. The 10- and 20-City Composites were up 0.8% and 0.7%, respectively, in April versus March. Both indices are lower than a year ago; the 10-City Composite fell 3.1% and the 20-City Composite is down 4.0% from April 2010 levels. Six of the 20 MSAs showed new index lows in April – Charlotte, Chicago, Detroit, Las Vegas, Miami and Tampa.

Thirteen of the cities and both composites posted positive monthly changes. With index levels of 152.51 and 138.84, respectively, both the 10- and 20-City Composites are above their March 2011 levels, which had been a new crisis low for the 20-City Composite.

Comparing all the home price indices, it needs to be understood each of the indices use a different methodology in compiling their indexes – and no index is perfect. In this case, however, all are demonstrating the same trends.

The upward bounce we are seeing is the annual seasonal bounce we see every year – and this effect has been forecast. The difference is the bounce is coming from a lower starting point in double dip territory. With weak sales figures so far this season, it does not look like a recovery is yet on the horizon.

A synopsis of Authors of the Leading Indices:

Case Shiller is uncertain of what the uptick in home prices is indicating.

“In a welcome shift from recent months, this month is better than last – April’s numbers beat March,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “However, the seasonally adjusted numbers show that much of the improvement reflects the beginning of the Spring-Summer home buying season. It is much too early to tell if this is a turning point or simply due to some warmer weather.

“Other housing statistics show the same trends. Single-family housing starts were up in May, but still well below their 2010 levels and still very close to their 30-year low. Existing home sales rose in May, but are still about 15% below last year’s pace and about 35% below their 2005 pace. While foreclosures remain a large factor in most parts of the country, the S&P/Experian Consumer Credit Default indices show a small decline in the pace of new defaults since last November. Other reports confirm that banks have tightened lending standards in the past year making it harder to qualify for a mortgage despite very low interest rates.

CoreLogic‘s Mark Fleming, chief economist is commenting on the first rise this year in their April index:

While the economic recovery is still fragile and one data point is not a trend, the month-over-month increase based on April sales activity is a positive sign. This is the first month-over-month increase in the HPI since government support for home buying was removed, and it provides reason for cautious optimism.

Lawrence Yun of the National Association of Realtors is blaming the weak market conditions on weather, oil prices and credit for weak market conditions in their May data even though home prices increased:

“Spiking gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May,” he said. “Current housing market activity indicates a very slow pace of broader economic activity, but recent reversals in oil prices are likely to mitigate the impact going forward. The pace of sales activity in the second half of the year is expected to be stronger than the first half, and will be much stronger than the second half of last year.”

Yun said the market also is being constrained by the lending community. “Even with recent economic softness, this is a disappointing performance with home sales being held back by overly restrictive loan underwriting standards,” he said. “There’s been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction – this overreaction is clearly holding back the recovery.”

Real time data provider Altos Research sees a normal seasonal upswing in home prices in their May data:

The dominoes are falling as the traditional HPIs are starting to recognize that housing prices aren’t falling through the floor this quarter. It was only a few weeks ago that S&P Case-Shiller announced their March data and the Double Dip headlines screamed. Today, Radar Logic released their RPX data for April and is the latest of the HPIs to tick up month over month. For your refresher, here’s how history unfolded.

Source Date of Inflection Date Published
Altos 20-city Composite Price of New Listings (weekly) January 14, 2011 January 17, 2011
Altos 20-city Composite Median Price (weekly) February 4, 2011 February 7,2011
DISCERN Housing Market Analysis February 7, 2011
Altos 20-city Composite Median Price (90 Day Rolling Avg) March 25, 2011 March 28, 2011
Altos Catfish Recovery Webcast June 1, 2011
CoreLogic HPI April, 2011 June 1, 2011
FHFA national home price index April, 2011 June 22, 2011
Radar Logic RPX April, 2011 June 23, 2011
S&P Case Shiller 20 City Composite April, 2011

Altos Research this month also stated:

Expect a triple dip, a quadruple dip, and a quintuple dip. Heck, we saw back in July that 2011 home prices would fall below 2009 levels. We confirmed this in November. Expect volatility. Repeat: Expect volatility.

Read through the related articles below from various authors. Econintersect publishes all knowledgeable views of the housing market. There is no dispute that home prices are improving, but this is normal this time of year. The common thread is that no one is seeing any indication that the general decline is over in existing home sales or prices.

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April 2011 Pending Home Sales Signals Disaster in Home Market by Steven Hansen

CoreLogic Sees Short Sales Growing 25% in 2011 by CoreLogic

Flipping Mad Over Fraud Flips by Frank McKenna

Housing Market Recovery Undermined by Seriously Delinquent Homeowners by Keith Jurow

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Strategic Defaults: A Bad Situation That Could Get Worse by Keith Jurow