|20-city, SA - M/M||0.1%||-0.2% to 0.6%||-0.2%||-0.1%||-0.2%|
|20-city, NSA - M/M||0.9%||0.6% to 1.5%||0.6%||1.0%||0.9%|
|20-city, NSA - Yr/Yr||5.3%||4.5% to 6.0%||5.0%||5.0%||4.9%|
Case-Shiller is reporting what is becoming striking weakness in home prices, at -0.2 percent in July for the adjusted 20-city index which, after a downward revision to June, is the third straight 2 tenths decline. Twelve of 20 cities show contraction in the month with the deepest for a third straight month in a row coming from Chicago at minus 1.2 percent. Year-on-year readings are all still positive led by San Francisco at plus 10.4 percent with Washington DC at the bottom at 1.7 percent.
Year-on-year, the 20-city index, whether adjusted or unadjusted, is at plus 5.0 percent vs 4.9 percent in July. The unadjusted month-to-month index, reflecting summer strength in home sales, was up 0.6 percent in August for however the weakest reading since the winter weather of February.
This report is very closely watched and offsets last week's gain for FHFA prices which are trending slightly higher than Case-Shiller. Home sales have been mixed this year with existing homes showing strength through most of the year but weakness in the latest report and vice versa for new homes which had been weak but have since popped higher. Lack of home-price appreciation is a negative for household wealth and spending and may be another symptom of general price weakness.
Market Consensus Before Announcement
Case-Shiller home price data have been flat and, despite a bounce higher for the FHFA house price index in August, are expected to stay flat. The consensus is calling for only a 0.1 percent rise in the 20-city adjusted index for August which, in a plus, would reverse the 0.1 percent decline in July. Home prices, despite respectable strength in home sales, have been flat this 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.