|M/M change||0.4%||0.3% to 0.5%||0.8%||0.3%|
Yesterday's gains for Case-Shiller are now underpinned by a very strong FHFA house price report where the September index jumped 0.8 percent with gains across all nine regions. This is the strongest monthly gain since March 2013. Year-on-year, FHFA is up 6.1 percent for the best showing since March last year (this reading hit a recovery high in the low 8 percent area in mid-2013).
Home-price appreciation is a central factor for household confidence and spending strength. Price gains will also draw in more supply to the housing sector which in turn should give a boost to still uneven sales levels. Watch for new home sales, which fell sharply in the prior month, later this morning at 10:00 a.m. ET.
Market Consensus Before Announcement
Home-price appreciation, as measured by the FHFA house price index, is expected to bounce back in September, to a consensus plus 0.4 percent vs plus 0.3 percent in August. Despite lack of available homes on the market, home prices have been soft and have not been contributing much to consumer momentum.
The Federal Housing Finance Agency (FHFA) House Price Index (HPI) covers single-family housing, using data provided by Fannie Mae and Freddie Mac. The House Price Index is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. In contrast to other house price indexes, the sample is limited by the ceiling amount for conforming loans purchased by these government-sponsored enterprises (GSE). Mortgages insured by the FHA, VA, or other federal entities are excluded because they are not "conventional" loans. The FHFA House Price Index is a repeat transactions measure. It compares prices or appraised values for similar houses. But markets focus on the report's purchase-only index.
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 has 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 recent years. But an additional problem for consumers is that a decline in home values reduces the ability of a home owner to refinance. During 2007, 2008, and into 2009 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.