US: S&P Corelogic Case-Shiller HPI

January 31, 2017 08:00 CST

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.7% 0.4% to 0.8% 0.9% 0.6% 0.7%
20-city, NSA - M/M 5.0% 5.0% to 5.4% 0.2% 0.1%
20-city, NSA - Yr/Yr 5.3% 5.1%

Case-Shiller's home price index, which had been lifeless, rose sharply in November, up 0.9 percent for the best monthly gain since March 2015. The year-on-year rate rose 2 tenths to 5.3 percent, an improvement but still down from the 5.5 percent area of early last year.

Improvement for the East is November's special strength. Prices in New York jumped 1.2 percent in the month following a solid 0.5 percent gain in October. Yet year-on-year, New York is still the weakest of the 20 cities in the index, up only 2.4 percent. Boston is also having a strong run, up 1.2 and 1.0 percent in the last two reports with its year-on-year rate, which had been lagging, now at 5.5 percent. The West is the strongest with Seattle, at 10.4 percent, and Portland, at 10.1 percent, out in front.

There is traction though this report continues to show less strength than the FHFA house price index which has been running at the 6 percent rate. But it's the direction that counts most, and today's news is good.

Market Consensus Before Announcement
Annual growth in the Case-Shiller 20-city index has been flat at just above 5 percent, about 1 percentage point below the FHFA house price index. But Case-Shiller's monthly index did show acceleration in the prior two reports and the Econoday consensus is calling for a bit more strength in November, at a consensus gain of 0.7 percent. But in an offset, the year-on-year rate is expected to ease 1 tenth to 5.0 percent.

The S&P Corelogic Case-Shiller home price index tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S. Composite indexes and regional indexes measure changes in existing home prices and are based on single-family home re-sales. The expanded 20-city measure is the key series. 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 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 are for November.

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.