US: S&P Case-Shiller HPI

Tue Apr 28 08:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.7% 0.6% to 1.0% 0.9% 0.9% 0.9%
20-city, NSA - M/M 0.2% 0.1% to 0.2% 0.5% 0.0% -0.1%
20-city, NSA - Yr/Yr 4.8% 4.5% to 5.0% 5.0% 4.6% 4.5%

Home price data have been firming in what is the latest positive signal from a still struggling housing sector. The Case-Shiller adjusted 20-city index rose a very strong 0.9 percent in February, beating Econoday expectations for 0.7 percent and extending its best performance since late 2013. And year-on-year the index is also picking up speed, at plus 5.0 percent for a 5 tenths gain from the prior month and the best showing since last summer. Today's report should boost hopes for a most welcome spring rally in the housing sector.

The breadth of the gain is very convincing, with none of the 20 cities showing an adjusted monthly decline since all the way back in September. The latest monthly gains are exceptionally well balanced with the lowest gain, for Cleveland, at a very respectable 0.4 percent. San Francisco shows an unusually strong surge in the month, at 3.3 percent followed by Denver at 2.2 percent. And the year-on-year trends for both of these cities lead the pack, in the high single digits for San Francisco and with Denver now moving into the double digits at 10 percent even.

Unadjusted data are tracked in this report and tell the same story with the year-on-year rates exactly the same, at plus 5.0 for the current month and a revised plus 4.5 percent for the prior month. Month-to-month, the unadjusted 20-city gain is 0.5 percent for February vs a revised minus 0.1 percent in January, both reflecting the relatively light activity in housing during the winter months.

If it wasn't for the shocking weakness in March's housing starts & permits data, the outlook for the housing sector would definitely be a plus for the economic outlook. Watch for home buying plans in the consumer confidence report later this morning as well as pending home sales on tomorrow's calendar followed by construction spending on Friday.

Market Consensus Before Announcement
The S&P/Case-Shiller 20-city home price index (SA) 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 percent in January and only fractionally higher than the prior two months.

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.