US: S&P Case-Shiller HPI

Tue Mar 29 08:00:00 CDT 2016

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.7% 0.6% to 1.0% 0.8% 0.8%
20-city, NSA - Yr/Yr 5.8% 5.7% to 6.3% 5.7% 5.7% 5.6%
20-city, NSA - M/M 0.0% 0.0%

Month-to-month gains in home prices have been solid since the third quarter, based on Case-Shiller data where the 20-city adjusted index rose 0.8 percent in January for the fourth straight gain near or at a monthly 1.0 percent. The year-on-year index, however, has been stuck at plus 5.7 percent for the last three months.

The breadth of strength is very convincing with all 20 cities showing both monthly and year-on-year gains going all the way back to September. The strongest rates of monthly gains in the latest report are once again in the West led by Seattle and Portland, both at 1.5 percent, with San Diego and Los Angeles right behind at 1.1 percent and 1.0 percent. Detroit and Chicago, which are often at the rear, are at the top with respective January gains of 1.4 and 1.0 percent. Year-on-year, appreciation is strongest in Portland (11.8 percent), Seattle (10.8 percent), and San Francisco (10.5 percent). At the rear is Washington DC (2.1 percent) and New York (2.8 percent).

Aside from the West, however, rates of gains are on the slow side which, given lack of wage growth, points to lack of punch for household wealth. And the year-on-year rate is likely to be held back in the Spring months given hard comparisons with pricing strength last spring.

Market Consensus Before Announcement
Case-Shiller price data are expected to track FHFA data and move sharply higher in February, up a consensus 0.7 percent for the Case-Shiller adjusted 20-city index. But Case-Shiller's year-on-year rate is expected to edge only 1 tenth higher to 5.8 percent which would be 2 tenths short of FHFA which is back at 6.0 percent, a solid rate but well short of outside expectations for 10 percent appreciation this year. Home-price appreciation, given weakness in wages, could be key to household wealth 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.