US: S&P Case-Shiller HPI

Tue Nov 24 08:00:00 CST 2015

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.3% 0.1% to 0.7% 0.6% 0.1%
20-city, NSA - Yr/Yr 5.3% 5.1% to 5.6% 5.5% 5.1%
20-city, NSA - M/M 0.2% 0.4% 0.3%

Prices of existing homes showed a lot of life in September, up 0.6 percent for Case-Shiller's 20-city adjusted index which is at the high end of the Econoday consensus. Year-on-year, prices were up 5.5 percent which is 2 tenths better than expectations and the best showing since last summer.

The breadth of strength is impressive with none of the 20 cities showing a monthly decline. Monthly gains are led by the Southeast and West with Miami at plus 1.2 percent and Tampa and Atlanta both at 1.0 percent. San Francisco also posted a 1.2 percent gain with Portland at 1.0 percent. Year-on-year, San Francisco is out in front at plus 11.3 percent followed by Denver at plus 10.9 percent. Bringing up the rear are New York at plus 2.7 percent, Washington at plus 2.2 and Chicago in last but still in the plus column at 1.2 percent.

Though year-on-year home-price appreciation is tame relative to prior rates, which peaked this cycle in the low double digits in the second half of 2013 and early 2014, September's strength will not only help boost household wealth but also pull more homes into the market where supply of existing homes is very thin and holding back sales.

Market Consensus Before Announcement
Case-Shiller 20-city home prices are expected to bounce higher in September, up a consensus 0.3 percent for the 20-city adjusted index vs only a 0.1 percent increase in August. The unadjusted year-on-year rate is expected to rise 2 tenths to plus 5.3 percent. Such gains would be welcome as data in this report have been very soft, belying lack of available homes on the housing market and pointing to weakness for household wealth.

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.