US: S&P Corelogic Case-Shiller HPI

Tue Apr 24 08:00:00 CDT 2018

Consensus Consensus Range Actual Previous
20-city, SA - M/M 0.7% 0.5% to 0.7% 0.8% 0.8%
20-city, NSA - M/M 0.2% 0.1% to 0.3% 0.7% 0.3%
20-city, NSA - Yr/Yr 6.2% 6.1% to 6.6% 6.8% 6.4%

Low supply of available homes for the sale is a key factor behind strength in housing prices. Case-Shiller's 20-city adjusted index rose 0.8 percent in data for February. FHFA data, also released this morning, also exceeded expectations.

Year-on-year rates, at 6.8 percent for Case-Shiller and 7.2 percent for FHFA, are at 4-year highs. There is strong pressure out West in both reports with Case-Shiller's tally showing low double-digit growth in Seattle, Las Vegas and San Francisco. Those with the lowest growth in Case-Shiller are Washington DC and Chicago which are both in the low single digits.

Six percent rates for home-price appreciation were a solid fixture of the 2017 economy and a 6 to 7 percent rate appears to be the outlook for 2018. Watch later this morning at 10:00 a.m. ET for the latest on new home sales.

Market Consensus Before Announcement
Home price acceleration has been at a 3-1/2-year high, whether for FHFA data or the Case-Shiller 20-city adjusted index where the consensus is calling for another solid monthly gain of 0.7 percent in data for February. But the year-on-year rate is not seen moving higher, to 6.2 percent vs 6.4 percent in the prior month. The unadjusted monthly rate, at only a 0.2 percent expected gain, is a reminder that housing activity during the winter months is seasonally slow.

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.