US: S&P Corelogic Case-Shiller HPI

Tue Jun 26 08:00:00 CDT 2018

Consensus Consensus Range Actual Previous Revised
20-city, SA - M/M 0.5% 0.3% to 0.6% 0.2% 0.5% 0.4%
20-city, NSA - M/M 0.8% 0.2% to 0.8% 0.8% 1.0%
20-city, NSA - Yr/Yr 6.8% 6.6% to 7.0% 6.6% 6.8% 6.7%

Home prices slowed going into and during the early part of the Spring selling season with Case-Shiller the latest to confirm the softening. Case-Shiller's 20-city adjusted index managed only a 0.2 percent gain in April to come up short of Econoday's low estimate. The year-on-year rate, at 6.6 percent, is no better than the low estimate.

Prices were weak in New York City, Washington DC as well as Atlanta and Chicago. Boston and Detroit, which have been weak, are showing life. Cities in the West, where outsized strength has been the norm, eased with San Francisco posting a rare decline.

April is a busy month for home sales and is reflected in the greater percentage change for the unadjusted monthly index which rose 0.8 percent. This matches expectations which takes the edge off the headline weakness suggesting that it's tied to seasonal adjustments.

Yet price concessions were apparent in last week's existing home sales report for May and yesterday's new home sales report as well. Demand strength for the Spring housing season appears to be less than convincing which for policy makers may actually be a plus given what may have been a pattern of overheated price appreciation last year. And there's still evidence of this out West with year-on-year growth in Seattle, Las Vegas and San Francisco all in the low double digits.

Market Consensus Before Announcement
Home-price appreciation has been strong but appeared to slow going into the Spring selling season. Renewed strength is the call for April's Case-Shiller data where the consensus gain for the 20-city adjusted index is a solid 0.5 percent with the unadjusted year-on-year rate seen holding at 6.8 percent. The consensus for unadjusted monthly growth, reflecting the relative strength of April compared with other months of the year, is 0.8 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 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.