US: S&P Corelogic Case-Shiller HPI

Tue May 29 08:00:00 CDT 2018

Consensus Consensus Range Actual Previous
20-city, SA - M/M 0.7% 0.6% to 0.8% 0.5% 0.8%
20-city, NSA - M/M 0.5% 0.2% to 0.6% 1.0% 0.7%
20-city, NSA - Yr/Yr 6.4% 6.3% to 7.0% 6.8% 6.8%

Home-price appreciation is slowing going into the Spring housing season with Case-Shiller's March data offering the latest indication. The 20-city adjusted index rose a softer-than-expected 0.5 percent which is just below Econoday's low estimate. This follows last week's very weak FHFA report and also similarly soft price indications in both the new and existing home reports.

Minneapolis has been showing a run of strength, jumping a monthly 1.3 percent in March following 0.9 and 1.0 percent gains in the prior two months. Otherwise, the West continues to dominate with Seattle and Las Vegas also rising 1.3 percent in the month and Phoenix up 1.0 percent. But cities like Atlanta at 0.3 percent and Charlotte at 0.5 percent tell the month's story, both posting moderate gains. Cleveland, at minus 0.2 percent, and Dallas at plus 0.2 percent bring up the rear,

The year-on-year rate for Case-Shiller is steady, coming in at 6.8 percent though the slowing in the monthly rate will ease expectations for an approach to the 7 percent line. The unadjusted monthly index rose 1.0 percent reflecting March's relative strength in home prices compared to other months.

But early traction in the Spring housing season appears to be less convincing than usual which, for policy makers committed to sustainable economic growth, is probably a plus given what may have been a pattern of overheated price appreciation last year. And there's still hints of this out West with year-on-year growth in Seattle, Las Vegas and San Francisco all in the double digits (12.9, 12.4, and 11.2 percent respectively).

Market Consensus Before Announcement
The Case-Shiller 20-city index had been pushing toward 7 percent annual growth, at 6.8 percent in the last report for February. But after significant slowing in FHFA's March data, forecasters do not see extending strength for Case-Shiller's year-on-year rate with the consensus at 6.4 percent. Yet monthly estimates are solid, up 0.7 percent for the adjusted rate and up 0.5 percent for the unadjusted rate.

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 nation. Composite indexes and regional indexes measure changes in existing home prices and are based on single-family home resales. Condominiums and co-ops are excluded as is new construction.

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.