US: S&P Corelogic Case-Shiller HPI

Tue Sep 26 08:00:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.3% 0.1% to 0.4% 0.3% 0.1%
20-city, NSA - Yr/Yr 5.9% 5.8% to 5.9% 5.8% 5.7% 5.6%
20-city, NSA - M/M 0.7% 0.7%

Case-Shiller home prices firmed in July, to a 0.3 percent adjusted gain for the 20-city index. The trend is favorable with the year-on-year rate rising 2 tenths to an unadjusted 5.8 percent and in line with other home price readings which are also roughly at the 6 percent rate.

This report is for July and looking at cities in Texas and Florida offers a base of comparison for pending hurricane effects in August and September. Dallas was at a 7.4 percent yearly rate in July with Tampa at 7.1 percent and Miami at 5.2 percent. The 20 cities covered do not include Houston.

Leading the list continues to be Seattle, at 13.5 percent, with Portland lagging in 2nd place at 7.6 percent. Tail-enders continue to be Chicago and Washington DC, both at 3.4 percent, with Cleveland and New York City only slightly less weak.

Home prices are a principal source of growth in household wealth along with stock prices and much less so for wages. But the negative side to strong home-price appreciation is lack of affordability which hurts sales in general especially for first-time buyers. Note that the unadjusted monthly rate rose 0.7 percent in the month which reflects the relative strength of housing demand during the warmth of the summer months.

Market Consensus Before Announcement
Case-Shiller home prices have been firm but slowing held down by weakness centered in Chicago, Cleveland and New York. In contrast, western cities led by Seattle and Portland have been strong along with Miami and Tampa in Florida. Speaking of Florida, Case-Shiller will gain special attention in coming reports for August and September that will include data on cities hit by Hurricanes Harvey and Irma. For July, the consensus for the 20-city adjusted index is plus 0.3 percent vs a 0.1 percent gain in June. Year-on-year, the unadjusted index is expected to come in at 5.9 percent in what would be a 2 tenth increase from 5.7 percent in June.

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. Note that S&P, citing large seasonal swings in the housing sector and the risk of adjustment inaccuracies, urges readers to track unadjusted data in this report.

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.