US: S&P Case-Shiller HPI

Tue May 26 08:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.9% 0.5% to 1.6% 1.0% 0.9% 1.2%
20-city, NSA - M/M 0.9% 0.5% to 0.9% 0.9% 0.5% 0.5%
20-city, NSA - Yr/Yr 4.6% 4.5% to 5.4% 5.0% 5.0% 5.0%

Indications on home prices were rising solidly going into the spring selling season though there were some signs of stalling. S&P Case Shiller's adjusted 20-city house price index rose a very solid and slightly higher-than-expected 1.0 percent in March with gains across all cities and well balanced gains across all regions. These gains, however, were not confirmed by the FHFA house price index, also released at 9:00 a.m. ET today, which rose a lower-than-expected 0.3 percent in March. But year-on-year readings in both reports show an improving trend, at a moderate 5.0 percent for Case-Shiller and plus 5.2 percent for FHFA.

Turning to Case-Shiller, the strongest gain in March came from Detroit where prices rose 2.6 percent following 1.2 percent and 1.0 percent gains in the two prior months. Gains in this hard-hit city speak to general strength for house prices. Prices have also been rising in Minneapolis, up 1.8 percent following February's 1.7 percent gain. West Coast cities as usual are at the top of the price list with Florida also showing strength.

Unadjusted data are closely watched in the Case-Shiller data and tell the same story with a 0.9 percent 20-city gain in March. Both adjusted and unadjusted data show plus 5.0 percent year-on-year rates for both March and February in what is a rising trend from prior months.

House prices are far from frothy to say the least but nevertheless are hinting at second-quarter strength for the sector. Watch for new home sales coming up later this morning at 10:00 a.m. ET.

Market Consensus Before Announcement
S&P Case-Shiller house prices have been accelerating, reflecting low supply of used homes on the market and pointing to gains for household wealth. Gains for this report would suggest that housing was turning higher going into the spring selling season.

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.