US: S&P Case-Shiller HPI

Tue Jul 28 08:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.3% -0.2% to 0.6% -0.2% 0.3% 0.0%
20-city, NSA - Yr/Yr 5.6% 5.2% to 5.8% 4.9% 4.9% 5.0%
20-city, NSA - M/M 1.1% 1.1% 1.1%

Case-Shiller reports surprising weakness in home prices, at minus 0.2 percent in May which is right at the low-end Econoday estimate. Year-on-year, prices are flat at plus 4.9 percent which is 3 tenths below the low estimate. The data include a sizable downward revision to April which is now unchanged from an initial gain of 0.3 percent.

Declines are widespread, hitting 12 of 20 cities including a second straight decline, at a steep minus 0.7 percent in May, for the usually very strong San Francisco. Chicago, down 0.9 percent in the month, is also down for two straight months. Year-on-year, Denver is out in front at plus 10.0 percent followed by San Francisco at plus 9.7 percent and Dallas at plus 8.4 percent. Washington DC is at the bottom of the list at plus 1.3 percent and Cleveland at plus 1.6 percent.

This report contrasts a bit with the FHFA house price report where prices have continued to climb, though slowly, and where the year-on-year rate for May is slightly stronger at plus 5.7 percent. But together, they point to price concessions which likely helps explain the solid strength of existing home sales in May and June.

Market Consensus Before Announcement
The Case-Shiller home price index is expected to rise a moderate 0.3 percent in May but the year-on-year rate is seen posting a very solid gain to plus 5.6 percent from April's 4.9 percent. This report, as well as the FHFA housing price index, are on steady moderate climbs consistent with underlying strength in existing home sales.

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.