US: S&P Corelogic Case-Shiller HPI

November 28, 2017 08:00 CST

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.4% 0.3% to 0.5% 0.5% 0.5% 0.4%
20-city, NSA - M/M 0.4% 0.4% to 0.5% 0.4% 0.4%
20-city, NSA - Yr/Yr 6.2% 6.0% to 6.3% 6.2% 5.9% 5.8%

Home prices continued to rise in September in what, however, are mixed signals from this morning's Case-Shiller and FHFA reports. Case-Shiller data came in at the high end of expectations with a 0.5 percent monthly rise for the 20-city adjusted index and a year-on-year gain of 6.2 percent which is the best in 3-1/2 years. FHFA's house price index rose 0.3 percent which is just below Econoday's low estimate. FHFA's year-on-year rate of 6.3 percent is the lowest since January.

Details in the Case-Shiller report show wide strength with all 20 cities posting monthly gains led by Atlanta, San Francisco and Las Vegas at all 1 percent or more. Seattle continues to dominate in the year-on-year category, up 13.0 percent and the only city in double digits.

Among other details, October prices are right in line with the yearly average hence Case-Shiller's unadjusted monthly index is nearly the same as the adjusted, at a 0.4 percent monthly gain.

Where there's acceleration in Case-Shiller, there is however slowing in FHFA. Taking these two reports together, home prices appear to be steady at a roughly 6 percent annual rate which is rich in a low inflation, low interest rate economy.

Market Consensus Before Announcement
Case-Shiller home prices, like the FHFA index, moved higher in August and another gain is expected for September. Econoday's consensus is calling for a 0.4 percent increase in the 20-city adjusted index following August's 0.5 percent rise. The consensus for the unadjusted monthly index is also 0.4 percent with the consensus for the year-on-year rate at 6.2 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. 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.