US: S&P Case-Shiller HPI

Tue Apr 26 08:00:00 CDT 2016

Consensus Consensus Range Actual Previous
20-city, SA - M/M 0.7% 0.6% to 1.0% 0.7% 0.8%
20-city, NSA - M/M 0.2% 0.0%
20-city, NSA - Yr/Yr 5.5% 5.3% to 5.9% 5.4% 5.7%

Appreciation in home prices may not be moderating but it is far from spectacular, up 0.7 percent in February's 20-city adjusted index which is the softest reading since October. Year-on-year growth, at an unadjusted 5.4 percent, is down 3 tenths from January and also the softest showing since October.

Gains are strongest where they usually are, out West with both San Francisco and Denver up 1.5 percent on the month. San Diego, however, had a poor showing at only plus 0.2 percent and brings up the rear except for Washington, DC at plus 0.1 percent. Year-on-year, Portland and Seattle lead in the low double-digits with Washington once again at the bottom, at plus 1.4 percent, and New York second to last at only plus 2.1 percent.

The regional data have spots of weakness but, importantly, nothing in contraction. Housing prices at least are showing stability if not acceleration but are probably not strong enough to pull new sellers into the housing market nor perhaps, as far as household wealth and spending are concerned, strong enough to offset weak wage gains.

Market Consensus Before Announcement
February's gain of 0.4 percent for the FHFA house price index was very soft but forecasters see much more strength for Case-Shiller, at a consensus 0.7 percent for the adjusted 20-city index. But the year-on-year rate is expected to move down, not up, 2 tenths lower to plus 5.5 percent and below FHFA's 5.6 percent. Flat or not, home-price appreciation is still in the plus column and, given weakness in wages, is still a major 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.