US: S&P Case-Shiller HPI

Tue Mar 31 08:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.7% 0.5% to 1.1% 0.9% 0.9% 0.9%
20-city, NSA - M/M 0.1% 0.0% to 0.4% 0.0% 0.1% 0.1%
20-city, NSA - Yr/Yr 4.6% 4.2% to 5.0% 4.6% 4.5% 4.4%

Home prices are firming as the Case-Shiller composite-20 index rose 0.9 percent in January following a 0.9 percent gain in December and a 0.8 percent rise in November. This is the strongest streak for this report since late 2013. Year-on-year, however, prices are still on the soft side, up only 4.6 in January and only fractionally higher than the prior two months.

All regions show gains in January led once again by cities on the West Coast but also including strong gains in Chicago, Boston, Minneapolis, and Charlotte. Year-on-year, price strength is led by Denver at plus 8.4 percent followed by Miami at 8.3 percent and Dallas at 8.0 percent. At the bottom are Cleveland and Washington DC though both are still in plus column, at a year-on-year 1.5 and 1.3 percent respectively.

Unadjusted data are followed in this report and show no monthly change reflecting January's cold which holds down housing activity. But year-on-year, where monthly effects are limited, the data tell the same story with the rate, as in the adjusted data, at plus 4.6 percent.

Home prices are getting a boost from low inventory of available homes on the market and are a plus for homeowner confidence and consumer spending. Though seasonal adjustments play an outsized role in winter housing data, this report nevertheless extends a sudden run of favorable readings out of the housing sector which appears to be gaining momentum going into the spring selling season.

Market Consensus Before Announcement
The S&P/Case-Shiller 20-city home price index (SA) in December showed a sharp month-on-month gain of 0.9 percent. This was 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.

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.