US: S&P Case-Shiller HPI

Tue Jun 30 08:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.8% 0.5% to 1.8% 0.3% 1.0% 1.0%
20-city, NSA - Yr/Yr 5.4% 4.8% to 5.8% 4.9% 5.0% 5.0%
20-city, NSA - M/M 1.1% 0.9% 0.9%

Growth in home prices slowed sharply in April, up only 0.3 percent for Case-Shiller's 20-city index which is 5 tenths below Econoday's consensus and 2 tenths below the low forecast. The year-on-year rate, at plus 4.9 percent, is 5 tenths below the consensus and 1 tenth above the low end.

For the first time since all the way back in September, minus signs suddenly appear on the city breakdown list with 8 of 20 cities showing contraction in April. Cleveland shows the sharpest monthly contraction at minus 0.5 percent followed by Atlanta and Chicago at minus 0.4 percent each.

But several on the plus side show significant strength led by Minneapolis at a monthly plus 1.0 percent followed by Denver, Detroit and Las Vegas at plus 0.9 percent. Year-on-year, Denver and San Francisco lead the list at plus 10.3 and 10.0 percent with Dallas in third at plus 8.8 percent. Those showing the least year-on-year growth are Washington DC at plus 1.1 percent, Cleveland at plus 1.3 percent, and Boston at plus 1.8 percent.

But weakness in this report, where monthly readings are actually 3-month averages, reflects the weak sales conditions in the early part of the year, conditions which reversed strongly in May and which point to price strength for the May edition of this report. The next hard data on housing will be construction spending on tomorrow's calendar.

Market Consensus Before Announcement
The S&P Case-Shiller home price index is closely watched as a key measure for home prices, but perhaps less so with the latest report. Home sales in May shifted sharply higher which will limit the impact of Case-Shiller's April data. The April forecast, nevertheless, is solid with the Econoday consensus at plus 0.8 percent month-to-month and plus 5.4 percent year-on-year.

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.