July 2011 Case-Shiller Home Prices Show Marginal Improvement

Case-Shiller home price data for July 2011 (released today) shows a year to date improvement of 1.4% but a year-over-year decline of 4.1%. In June 2010, the year-to-date improvement was 0.4%, and the year-over-year decline was 4.5%.

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

Data through July 2011, released today by S&P Indices for its S&P/Case-Shiller 1 Home Price Indices, the leading measure of U.S. home prices, showed a fourth consecutive month of increases for the 10- and 20-City Composites, with both up 0.9% in July over June.  Seventeen of the 20 MSAs and both Composites posted positive monthly increases; Las Vegas and Phoenix were down over the month and Denver was unchanged. On an annual basis, Detroit and Washington DC were the two MSA that posted positive rates of change, up 1.2% and 0.3%, respectively.  The remaining 18 MSAs and the 10- and 20- City Composites were down in July 2011 versus the same month last year. After three consecutive double-digit annual declines, Minneapolis improved marginally to a decline of 9.1%, which is still the worst of the 20 cities.

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. The National Association of Realtors normally shows exaggerated movements which likely is due to inclusion of higher value homes.  However, the seasonal downturn has begun with their August data.

Econintersect is seeing a gentle upward trend in the volumes of sales.  This trend is indicating improving dynamics in existing home sales.

A synopsis of Authors of the Leading Indices:

Case Shiller says the housing market is not yet recovering.

“While we have now seen four consecutive months of generally increasing prices, we do know that we are still far from a sustained recovery. Eighteen of the 20 cities and both Composites are showing that home prices are still below where they were a year ago. The 10-City Composite is down 3.7% and the 20-City is down 4.1% compared to July 2010. Continued increases in home prices through the end of the year and better annual results must materialize before we can confirm a housing market recovery.

“As with May and June’s reports, we saw some unusually large revisions across some of the MSAs. In particular, Detroit was most affected in July, with the revisions showing a much healthier market than previously thought. Our sales pairs data indicate that this market reported a lot more sales in May and June, which caused the revisions. As we have indicated before, when sales volumes are relatively low and the ratios of distressed-to-non-distressed sales are changing rapidly, revisions are more noticeable. These factors likely contributed to the revisions we saw not just in Detroit, but in many of the MSAs over the past few reports.

“Other recent housing statistics show that single-family housing starts were down slightly in August, and are about 2% below their year ago level; and these levels are at 30-year lows. Existing-home sales, however, were up in August and are about 20% above their August 2010 level. The S&P/Experian Consumer Credit Default indices showed a continuing decline in mortgage default rates, a two-year trend. However, if you look at the state of the overall economy and, in particular, the recent large decline in consumer confidence, these combined statistics continue to indicate that the housing market is still bottoming and has not turned around.”

CoreLogic‘s Mark Fleming, chief economist talks about the economic issues affecting home prices:

“While July’s numbers remained relatively positive, particularly for non-distressed sales which have been stable, seasonal influences are expected to fade in late summer. At that point, the month-over-month growth will most likely turn negative. The slowdown in economic growth and increased uncertainty caused by the recent stock market volatility will continue to exert downward pressure on prices.”

Lawrence Yun, NAR chief economist commenting on August 2011 data said investors were aiding in clearing the market.

“Some of the improvement in August may result from sales that were delayed in preceding months, but favorable affordability conditions and rising rents are underlying motivations.  Investors were more active in absorbing foreclosed properties. In additional to bargain hunting, some investors are in the market to hedge against higher inflation.”

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

Since a peak in early July, we’ve seen week over week cooling of the housing market. The spring price and inventory bumps are over and we’re settling in for a long, cold winter.

Prices decreased in seventeen markets this month (seven markets reported a decrease in prices last month). In the markets that experienced increases in prices, the increases were small.

The weekly-sampled prices are still trending downward and the 90-day prices have begun their descent (illustrated in Figure 1). The 90-day prices were flattening last month. The declining curve will become more pronounced as the market continues to cool.

The loss of momentum from the summer market activity is unmistakable. Transaction statistics published by S&P/Case-Shiller will show the same loss of momentum in a few months.

Econintersect publishes all knowledgeable views of the housing market. The common thread is that no one is seeing any indication that the general decline in existing home prices is over.

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