Case-Shiller Home Prices Improve Slightly in August 2011

Case-Shiller home price data for August 2011 (released today) shows a year to date improvement of 0.35% but a year-over-year decline of 3.8%. In August 2010, the year-to-date improvement was 1.7%, and the year-over-year improvement was 1.6%.

Of all the leading home price indices, only Case-Shiller showed home price improvement in August – by a mere 0.15% month-over-month.  Econintersect will compare all the home price indices in this post, but first the Case-Shiller headlines:

Data through August 2011, released today by S&P Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, showed increases of +0.2% for the 10- and 20-City Composites in August versus July. Ten of the 20 cities covered by the indices also saw home prices increase over the month. In addition, 16 of the 20 MSAs and both Composites posted improved annual returns compared to July’s data; Los Angeles and Miami saw no change in annual returns in August; and Atlanta and Las Vegas saw their annual rates of change fall deeper into negative territory. The 10- and 20-City Composites posted annual returns of -3.5% and -3.8% versus August 2010, respectively. At -8.5%, Minneapolis posted the lowest year-over-year return, but has improved in each of the last three months. Detroit and Washington DC were the only two cities to post positive annual returns of +2.7% and +0.3% respectively.

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 began 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’s David M. Blitzer, Chairman of the Index Committee at S&P Indices sees some hope in the data.

“There was some weakness in the monthly statistics, as 10 of the cities post price declines in August over July.”  And even though the annual rates are largely improving, 18 MSAs and both Composites are still negative. Nationally, home prices are still below where they were a year ago. The 10-City Composite is down 3.5% and the 20-City is down 3.8% compared to August 2010.

“In the August data, the good news is continued improvement in the annual rates of change in home prices.  In spring and summer’s seasonally strong period for housing demand, we cautioned that monthly increases in prices had to be paired with improvement in annual rates before anyone could declare that the market might be stabilizing. With 16 of 20 cities and both Composites seeing their annual rates of change improve in August, we see a modest glimmer of hope with these data. As of August 2011, the crisis low for the 10-City Composite was back in April 2009; whereas it was a more recent March 2011 for the 20-City Composite. Both are about 3.9% above their relative lows.

“The Midwest is one region that really stands out in terms of recent relative strength. Chicago, Detroit and Minneapolis have all posted very sharp monthly increases going back to May. These markets were some of the weakest during the crisis, particularly Detroit. But as of August 2011, Detroit is the healthiest when viewed on an annual basis. It is up 2.7% versus August 2010. Prices there are still back to their 1995 levels,but the recent pickup in the US auto industry may finally be helping.

CoreLogic‘s Mark Fleming, chief economist implies the market is doing well considering the headwinds:

“Although the calendar says August, the end of the summer traditionally marks the beginning of “fall‟ for the housing market as it begins to prepare for “winter.‟ So the slight month-over-month decline was predictable, particularly given the renewed concerns over a double-dip recession, high negative equity, and the persistent levels of shadow inventory. The continued bright spot is the non-distressed segment of the market, which is only marginally lower than a year ago and continues to exhibit relative strength.”

Lawrence Yun, NAR chief economist commenting on September 2011 data said that existing home sales volumes were up from a year ago.

“Existing-home sales have bounced around this year, staying relatively close to the current level in most months,” he said. “The irony is affordability conditions have improved to historic highs and more creditworthy borrowers are trying to purchase homes, but the share of contract failures is double the level of September 2010. Even so, the volume of successful buyers is higher than a year ago and is remaining fairly stable – this speaks to an unfulfilled demand.”

Real time data provider Altos Research whose national index is updated through early October 2011 discusses the inventory situation:

The mass liquidation of foreclosure portfolios is best described as a trickle. The inventory is coming on the market slowly as more loans are modified to keep homeowners in their homes. Although the millions of properties in the shadow inventory are still looming, there is nothing that indicates a flood of foreclosures hitting the market anytime soon.

Housing inventory decreased in all the composite markets this month.  This is a significant change from last month, when half reported increased inventory and half reported decreased inventory. The decreased inventory follows a seasonal pattern seen every year around this time.

Prices decreased in 16 markets this month (17 markets reported a decrease in prices last month). In the markets that experienced increases in prices, the largest increase was 1.68% in Salt Lake City.

The weekly-sampled inventory and 90-day inventory trend lines are indicating decreasing inventory as we head into the winter months.

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

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