Case-Shiller June 2011 Data Continues to See Year-over-Year Decline

Case-Shiller home price data for June 2011 (released today) shows a year to date improvement of 0.4% and a year-over-year decline of 4.5%.  In June 2010, the year-to-date improvement was 1.8%, and the year-over-year decline was 4.2%.

The takeaways:

  • Case-Shiller continues to show less good seasonal improvement for the normal spring / summer buying season.
  • The rate of decline of home prices remains in the 4%+ territory year-over-year in June for the last two years.  There are no signs the trend lines are changing.  Home prices seem to still be seeking a bottom.
  • The Case-Shiller backward revisions seem to be growing.  All are slight – but this author remembers when even the previous month was not changed.  Now revisions go back a year. [read S&P comments on this point below].  Econintersect points out that backward revisions lessen the value of an index when trying to evaluate in real time.

Econintersect will compare all the home price indices in this post, but first the Case-Shiller headlines:

Data through June 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 that the U.S. National Home Price Index increased by 3.6% in the second quarter of 2011, after having fallen 4.1% in the first quarter of 2011. With the second quarter’s data, the National Index recovered from its first quarter low, but still posted an annual decline of 5.9% versus the second quarter of 2010. Nationally, home prices are back to their early 2003 levels.

As of June 2011, 19 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were up versus May – Portland was flat. However, they were all down compared to June 2010. Twelve of the 20 MSAs and both Composites have now increased for three consecutive months, a
sign of the seasonal strength in the housing market. None of the markets posted new lows with June’s report. Minneapolis posted a double-digit 10.8% annual decline; Portland is not far behind at -9.6%.  Thirteen of the cities and both composites saw improvements in their annual rates; however; they all are in negative territory and have been so for three consecutive months.

The chart above depicts the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices. The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 5.9% decline in the second quarter of 2011 over the second quarter of 2010. In June, the 10- and 20-City Composites posted annual rates of decline of 3.8% and 4.5%, respectively. Thirteen of the 20 MSAs and both monthly Composites saw their annual growth rates improve, although remaining in negative territory in June.

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. What is interesting is the National Association of Realtors is showing an exaggerated seasonal bounce which may be due to a distortion caused by more higher value homes being sold.

The NAR home prices tend to have more noise in their data.

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 talks about the zip code disparity in the data.

“This month’s report showed mixed signals for recovery in home prices. No cities made new lows in June 2011, and the majority of cities are seeing improved annual rates. The National Index was up 3.6% from the 2011 first quarter, but down 5.9% compared to a year-ago,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “Looking across the cities, eight bottomed in 2009 and have remained above their lows. These include all the California cities plus Dallas, Denver and Washington DC, all relatively strong markets. At the other extreme, those which set new lows in 2011 include the four Sunbelt cities – Las Vegas, Miami, Phoenix and Tampa – as well as the weakest of all, Detroit.

These shifts suggest that we are back to regional housing markets, rather than a national housing market where everything rose and fell together.  “As with May’s report, June showed unusually large revisions across the same MSAs – Detroit, New York, Tampa and Washington DC. Our sales pairs data indicate that, once again, these markets reported a lot more sales closing in prior months, which caused the revisions. Since deed recording is usually county based, if the price trends across counties are very different, then delays from a subset of counties can lead to larger revisions. And data lag lengths tend to vary across the counties within a metro area. If counties with relatively stronger/weaker markets report sales with longer / shorter lags, this will result in larger revisions as we receive the lagged data. Revisions are also likely to be larger when sales volumes are low or the proportions of distressed/non-distressed sales are changing rapidly. Any and all of these factors are likely contributing to the revisions we have seen over the past few reports.

CoreLogic‘s Mark Fleming, chief economist talks about the distressed home market affecting home prices:

“While there is a consistent and sustained seasonal improvement in prices over the last three months,  prices are lower than a year ago due to the decline in prices after the expiration of the tax credit last year. The difference between the overall HPI and our index excluding distressed sales indicates that the price declines are more concentrated in the distressed sales market.”

Lawrence Yun, NAR chief economist commenting on July 2011 data said this is an uneven recovery.

“Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers,” he said. “Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs.”

Real time data provider Altos Research whose national index is updated through early August 2011 sees the autumn downturn in play:

This month, seven of the markets reported declining prices. Compared to only one market reporting declining prices last month, that’s a noteworthy difference.

In addition to the first signs of prices changing direction, twenty of the markets in this report reported rising inventory this month. Twenty-one of the markets reported rising inventory at the three-month level.

The party is almost over, folks. You don’t have to go home, but you can’t stay here.

The weekly prices are still trending downward, as they have been for the past six weeks. Five markets reported price increases this month, albeit small increases. Detroit was the only market reporting more than a 2% price increase.

Econintersect publishes all knowledgeable views of the housing market.  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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