Annual Home Price Gains Fall Below 6% In August

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Includes: BBRE, CLAW, DRA, DRN, DRV, FREL, FRI, FTY, HOML, IARAX, ICF, ITB, IYR, JRS, KBWY, LRET, NAIL, NRO, PKB, PPTY, PSR, REK, RFI, RIF, RIT, RNP, RORE, RQI, RWR, SCHH, SRS, URE, USRT, VNQ, WREI, XHB, XLRE
by: Doug Short

By Jill Mislinski

With Tuesday's release of the August S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.10% month over month. The seasonally adjusted national index year-over-year change has hovered between 4.2% and 6.7% for the last two-plus years. Tuesday's S&P/Case-Shiller National Home Price Index (nominal) reached another new high.

The chart above illustrates the month-over-month change in the seasonally adjusted 20-city index, which tends to be the most closely watched of the Case-Shiller series. It was up 0.10% from the previous month. The nonseasonally adjusted index was up 5.5% year over year.

Investing.com had forecast a 0.1% MoM seasonally adjusted increase and 6.0% YoY nonseasonally adjusted for the 20-city series.

Here is an excerpt from the analysis in today's Standard & Poor's press release:

"Following reports that home sales are flat to down, price gains are beginning to moderate," says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. "Comparing prices to their levels a year earlier, 14 of the 20 cities, the National Index plus the 10-city and 20-city Composite Indices all show slower price growth. The seasonally adjusted monthly data show that 10 cities experienced declining prices. Other housing data tell a similar story: prices and sales of new single family homes are weakening, housing starts are mixed and residential fixed investment is down in the last three quarters. Rising prices may be pricing some potential home buyers out of the market, especially when combined with mortgage rates approaching 5% for 30-year fixed rate loans.

"There are no signs that the current weakness will become a repeat of the crisis, however. In 2006, when home prices peaked and then tumbled, mortgage default rates bottomed out and started a three year surge. Today, the mortgage default rates reported by the S&P/Experian Consumer Credit Default Indices are stable. Without a collapse in housing finance like the one seen 12 years ago, a crash in home prices is unlikely." [Link to source]

The chart below is an overlay of the Case-Shiller 10- and 20-City Composite Indexes along with the national index since 1987, the first year that the 10-City Composite was tracked. Note that the 20-City, which is probably the most closely watched of the three, dates from 2000. We've used the seasonally adjusted data for this illustration.

Home Price Index

Home Price Index

The next chart shows the year-over-year Case-Shiller series, again using the seasonally adjusted data.

Home Price Index

Here is the same year-over-year overlay adjusted for inflation with the Consumer Price Index owners' equivalent rent of residences.

Home Price Index

For a long-term perspective on home prices, here is a look at the seasonally and inflation-adjusted Case-Shiller price index from 1953, the first year that monthly data is available. Because the CPI owners' equivalent rent of residences didn't start until 1983, we've used the broader seasonally adjusted Consumer Price Index.

Home Price Index since 1953

To get an even better idea of the trend in housing prices over long time periods, we compare the change in the seasonally-adjusted Case-Shiller Home Price Index and the Consumer Price Index since 1953.

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