US: S&P Corelogic Case-Shiller HPI

Tue Jan 30 08:00:00 CST 2018

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.6% 0.4% to 0.7% 0.7% 0.7%
20-city, NSA - Yr/Yr 6.4% 6.3% to 6.7% 6.4% 6.4% 6.3%
20-city, NSA - M/M 0.2% 0.2%

Prices for existing homes rose a strong 0.7 percent in November to just beat expectations and match October's gain, according to Case-Shiller's 20-city adjusted index. Year-on-year, the index (both adjusted and unadjusted) rose a very strong 6.4 percent.

San Francisco easily leads the monthly gain at 1.8 percent which follows 1.3 percent gains in the prior 2 months. Year-on-year, it's Seattle that continues to lead at 12.7 percent rates the last 2 reports followed by Las Vegas at 10.6 percent and 10.2 percent. The softest showings continue to come from Washington, D.C. at a year-on-year plus 3.3 percent with Chicago at 3.6 percent.

But even the softest rates are easily above inflation rates and underscore the strength of housing demand and home prices. A limited number of homes on the resale market is a positive factor for prices though this is an increasing negative for sales which, in contrast to sales acceleration in the new home market, have in fact been flat.

Market Consensus Before Announcement
November's Case-Shiller report is expected to show a solid 0.6 percent gain for the adjusted 20-city index in what would underscore the strength of home-price appreciation which was one of the strongest aspects of the 2017 economy. The consensus for the unadjusted year-on-year rate is 6.4 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.