'Seasonality' Not a Factor in June Case-Shiller Improvement

by: Tom Brown

The bears dismissed Tuesday’s surprising June strength in the Case-Shiller Home Price Index as merely a reflection of the strength in home prices that typically occurs during the first half of the year--what one observer calls the annual “seasonal three-month April-June home price surge.”

Wrong! First, there’s no such thing as an annual “April-June home price surge.” The seasonal price bounce he’s thinking of usually starts in January and ends in May. By June, things tend to peter out. In particular, in six of the eight years from 2000 until 2007, the rate of monthly change in Case Shiller fell in June from May six times, by an average of 13 basis points. During the two years the rate did accelerate, it rose by just five basis points. This year, by contrast, the rate of change improved by 35 basis points.

Seasonality? I don’t think so.

It’s risky of course to put too much store in the meaning of single data point; there’s no way I’ll argue that the June Shiller data means that the beginning of a housing recovery is at hand. But it’s even riskier, it seems to me, to deny that the report was a contained some positive news. . .

Tom Brown is head of Bankstocks.com

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