US: S&P Corelogic Case-Shiller HPI

Tue Feb 27 08:00:00 CST 2018

Consensus Consensus Range Actual Previous
20-city, SA - M/M 0.6% 0.5% to 0.7% 0.6% 0.7%
20-city, NSA - M/M 0.1% 0.1% to 0.3% 0.2% 0.2%
20-city, NSA - Yr/Yr 6.3% 6.2% to 6.6% 6.3% 6.4%

Case-Shiller 20-city adjusted home prices rose a strong and as-expected 0.6 percent in December. Monthly gains are all led by Western names: Denver and Seattle at 1.2 percent and San Francisco and Las Vegas at 1.1 percent. Seattle is also leading the nation for the year-on-year rate, at 12.7 percent followed by Las Vegas at 11.1 percent. The tail enders are Chicago at 2.6 percent growth, Washington DC at 2.8 percent and Cleveland at 3.5 percent.

Overall year-on-year prices are up 6.3 percent and, despite a 1 downtick from November, are still trending higher. Also trending higher despite similar hesitation in December are this morning's separate data from FHFA. Given that housing prices have been climbing strongly, a little moderation is probably a good thing and helps lower the risk of overheating, a risk that appears to be tangible out West.

Market Consensus Before Announcement
Appreciation in home prices was one of 2017's biggest economic stories and the momentum likely continued into December following November's 0.7 percent monthly and 6.4 percent yearly gains for the Case-Shiller 20-city index. December's Case-Shiller index is expected to rise 0.6 percent with the yearly increase seen at 6.3 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.