US: S&P Case-Shiller HPI

Tue Oct 27 08:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.1% -0.1% to 0.6% 0.1% -0.2%
20-city, NSA - M/M 0.6% 0.3% to 0.9% 0.4% 0.6%
20-city, NSA - Yr/Yr 5.1% 4.9% to 5.7% 5.1% 5.0% 4.9%

Case-Shiller home prices edged higher in data for August, up 0.1 percent for the 20-city adjusted index to end three prior months of contraction. Year-on-year, the 20-city index, whether adjusted or unadjusted, is up 5.1 percent for a 2 tenths gain.

A look at individual cities shows many fewer minus signs with five posting monthly contraction vs an average of 12 over the prior three months. Year-on-year, the weakest spots are New York, Chicago, and Washington DC, all at plus 1.9 percent. The strongest spots are San Francisco, at 10.8 percent, and Denver at 10.7 percent.

Today's report is at least moving in the right direction and a reminder that home-price appreciation, though far from robust, is one of the few areas of the economy to show inflationary pressures.

Market Consensus Before Announcement
S&P Case Shiller data have been soft and more of the same is expected for August, with the Econoday consensus calling for only a 0.1 percent gain for the adjusted 20-city index. Prices for existing homes haven't shown much reaction to the very low levels of supply on the market, as sellers, despite the strength in sales, are still giving concessions. But even at mid-single digit year-on-year growth, home prices are at least one source of inflation in what has become, at least for now, a disinflationary economy.

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.