US: S&P Case-Shiller HPI

Tue Feb 24 08:00:00 CST 2015

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.5% 0.4% to 0.8% 0.9% 0.7% 0.8%
20-city, NSA - M/M -0.1% -0.3% to 0.0% 0.1% -0.2% -0.2%
20-city, NSA - Yr/Yr 4.2% 4.1% to 4.5% 4.5% 4.3% 4.3%

Sales of existing homes may be slow but price traction is appearing, at least it did in December as Case-Shiller's adjusted 20-city index shows a sharp month-on-month gain of 0.9 percent. This is the strongest monthly gain since March last year. Year-on-year growth, which had been slowing from the low double digits this time last year, is now leveling, at plus 4.5 percent vs November's 4.3 percent which is the first gain for this reading since way back in November 2013.

Unadjusted data, which are tracked closely in this report, tell the same story with the year-on-year rates exactly the same as the adjusted data, at 4.5 percent for December and 4.3 percent for November. The month-to-month rate, where adjustments have the largest effect, came in at plus 0.1 percent, much lower than the adjusted rate and reflecting the relative weakness of the housing market during the winter months. Note that strong adjustment effects are at play in housing data this time of year, a fact that does cloud the adjusted readings.

This report along with the FHFA report trended higher going into year-end, perhaps offering some explanation for the January spike in consumer confidence. But higher prices never did correlate with stronger sales as existing home sales late last year were no better than flat. And price data in yesterday's existing home sales report, which unlike Case-Shiller are not based on repeat transactions for individual homes, nevertheless do point to the risk of a downdraft for prices in January. The FHFA report for January will be posted Thursday morning at 9:00 a.m. ET.

Market Consensus Before Announcement
The S&P/Case-Shiller 20-city home price index (SA) showed some life in November rising 0.7 percent (seasonally adjusted) to match October's revised gain. Gains in the month were led by the largest region for home sales, the South, where Tampa, at plus 1.8 percent, and Atlanta, at plus 1.7 percent, showed particularly strong gains. Gains in the West were also strong led by San Francisco at plus 1.1 percent. Despite the strength in monthly sales, the year-on-year rate edged 2 tenths lower to plus 4.3 percent (both adjusted and unadjusted). This rate has been edging lower each month since November 2013 but the degree of the latest decline is very small and the downward curve is definitely flattening out in what is a positive indication that the comparison may soon begin to turn higher.

The S&P/Case-Shiller home price index tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S. The composite indexes and the regional indexes are seen by the markets as measuring changes in existing home prices and are based on single-family home re-sales. The key composite series tracked are for the expanded 20-city composite indexes. The original series (still available) covered 10 cities. A national index is published quarterly. The indexes are based on single-family dwellings with two or more sales transactions. Condominiums and co-ops are excluded as is new construction. The data are compiled for S&P by Fiserv, Inc. The S&P/Case-Shiller Home Price Indices are published monthly on the last Tuesday of each month at 9:00 AM ET. The latest data are reported with a two-month lag. For example data released in January 2008 were for November 2007.

Home values affect much in the economy - especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. During the first half of this decade sharply rising home prices boosted how much home equity households held. In turn, this increased consumers' ability to spend, based on wealth effects and from being able to draw upon expanding home equity lines of credit.

With the onset of the credit crunch in mid-2007, weakness in home prices had the reverse impact on the economy. New housing construction has been impaired and consumers have not been able to draw on home equity lines of credit as in prior years. But an additional problem for consumers is that a decline in home values reduces the ability of a home owner to refinance. During the recent recession, this became a major problem for subprime mortgage borrowers as adjustable rate mortgages reached the end of the low "teaser rate" phase and ratcheted upward. Many subprime borrowers had bet on higher home values to lead to refinancing into an affordable fixed rate mortgage but with home equity values down, some lenders balked at refinancing subprime borrowers. But even though the economy technically moved into recovery, unemployment has remained high and depressed home prices have affected an increasing number of households.