House Prices Continue Upward “March”

Standard and Poor’s reported that house prices rose in March. According to the most recent release, the S&P/Case-Shiller House Price Index – National Index grew by 10.2% on a year-over-year not seasonally adjusted basis. Following 19 consecutive months of year-over-year declines, house prices registered their tenth consecutive year-over-year increase in March. House price growth in Phoenix had the largest annual increase at 22.5%, followed by San Francisco with 22.2% and Las Vegas with 20.6%. Meanwhile, house prices in New York rose by 2.6% on a year-over-year not seasonally adjusted basis.

Standard & Poor’s calculates tiered house price indexes for 17 of the 20 MSAs included in the House Price Index – 20 City Composite. Tiered house price indexes for the Cleveland MSA were not available in March 2013. Tiered indexes measure changes in the value of existing single-family houses in three price tiers – low, middle, and high. Each tier represents approximately one-third of the sales transactions in each respective market. Over the past 12 months, house prices in the low tier have generally outperformed house prices in the middle tier and the high tier. As Chart 1 illustrates, the year-over-year increase in the low tier house price index has exceeded the annual percent growth in the middle- and upper-tier house price indexes for every MSA except Tampa.

The faster growth displayed by the low tier house prices in March 2013 relative to the middle and high tier is a continuation of the strong rebound exhibited by these house prices following the housing bust. Since reaching its respective trough, house price growth in the low tier has exceeded house price growth in both the middle and upper tier in each of the 16 MSAs except Seattle. In Seattle, the rebound in middle tier house prices has slightly exceeded the recovery of house prices in the low tier. However, the rebound in low tier house prices exceeds that of the high tier. A previous post noted that the strongest house price recoveries have typically taken place in geographic areas where house prices declined the most. A similar phenomenon is occurring across house price tiers. According to Chart 3, house price declines that took place following the housing bust were deepest in the low tier in every MSA for which data is available.

For full histories of the composites and 20 markets included in the Case-Shiller composites, click here cs.

House Price Growth Is Accelerating

Standard and Poor’s reported that house prices rose in February. According to the most recent release, the S&P/Case-Shiller Home Price Index – 20 City Composite grew by 9.3% on a year-over-year not seasonally adjusted basis. Following 20 consecutive months of year-over-year declines, house prices registered their ninth consecutive year-over-year increase in February.

Year-over-year house price growth has been generally widespread. As Chart 1 illustrates, house prices have risen on a not seasonally adjusted twelve month basis in each city tracked by the 20-City Composite Index. House prices in Phoenix experienced the largest price increase. In February 2013, Phoenix house prices rose by 23.0%, the sixth consecutive month that house prices have experienced a year-over-year increase greater than 20.0%. Meanwhile, New York City, which rose by 1.9%, experienced the smallest year-over-year growth in not seasonally adjusted house prices among this group. However, as Chart 2 illustrates, while the upward trend in Phoenix and New York house prices during the boom years were roughly similar, house prices in Phoenix experienced a more severe downturn than house prices in New York. As a result, the higher growth rate recently seen in Phoenix house prices reflects their greater distance from normality.

According to the April press release, the not seasonally adjusted 10- and 20-City Composite Indexes are “the leading measure of U.S. home prices”. Between January 2013 and February 2013, the rate of growth in the 20-City Composite Index increased from 8.1% to 9.3%. This acceleration partially reflects an increase in house prices between these two months. However, it largely reflects the house price declines that were still taking place one year ago. Between January 2013 and February 2013, house prices rose by 0.3% on a not seasonally adjusted basis. Meanwhile, between January 2012 and February 2012, house prices fell by 0.8%. As Chart 3 illustrates, the recent rise in house prices is being compared to a period of house price declines. As a result, the acceleration in year-over-year house prices may be overstating the strength of the recovery. However, Chart 4 illustrates that the seasonally adjusted house price index more clearly demonstrates that house prices are accelerating.

For full histories of the composites and 20 markets included in the Case-Shiller composites, click here cs.

House Price Increases Widespread

January was the second consecutive month-over-month increase in house prices and the eighth consecutive year-over-year increase. According to the most recent release by Standard and Poor’s, the S&P/Case-Shiller 20-City Composite House Price Index rose by 0.1% on a not seasonally adjusted monthly basis and the 10-City Index rose by 0.2% on a not seasonally adjusted monthly basis. In the 12 months ending in January 2013, house prices rose by 8.1% according to the 20-City Composite Index and 7.3% according to the 10-City Composite Index.

Year-over-year house price growth has been generally widespread. As Chart 1 illustrates, house prices have risen on a not seasonally adjusted 12 month basis in each city tracked by the 20-City Composite Index. House prices in Phoenix experienced the largest price increase. In January 2013, Phoenix house prices rose by 23.2%, the fifth consecutive month that house prices have experienced a year-over-year increase greater than 20.0%. As Chart 2 illustrates, although house prices in Phoenix have experienced rapid increases in recent months, they remain 44.3% below their June 2006 peak.

In a previous post it was noted that despite recent growth, house prices in the West have not reached the peak level experienced during the housing boom. However, comparing current house prices to this level may not be the best indicator of whether house prices in Phoenix have normalized. According to Chart 3, Phoenix house prices began to climb rapidly during the boom, before falling sharply. In the three years prior to this January 2004-June 2006 period, growth of Phoenix house prices mirrored the house price trends of Denver and Dallas, cities which experienced much smaller house price appreciation during the boom period and are closest to regaining their peak levels. Denver is 4.4% from its peak and Dallas is 4.7% below its high. After a steep decline, the trend of house prices in Phoenix has returned to a pace that is nearly similar to the trend of house prices in Denver and Dallas. Moreover, although house prices in Phoenix have experienced strong growth in recent months, its trend continues to remain at a level roughly on par with these two cities.

For full histories of the composites and 20 markets included in the Case-Shiller composites, click here cs.

Case-Shiller and FHFA House Price Indexes – 2012 Closes With Solid Gains

The Federal Housing Finance Agency (FHFA) and S&P/Case-Shiller (CS) released home price indexes for the end of 2012 today. The monthly FHFA national indexes were up 0.6% for the month (December over November, seasonally adjusted), 1.4% for the quarter (average fourth quarter months over average third quarter months, seasonally adjusted) and 5.9% for the year (December 2012 over December 2011, non-seasonally adjusted). The quarterly CS national indexes were up 2.0% for the quarter (fourth quarter over third quarter, seasonally adjusted) and 7.3% for the year (fourth quarter 2012 over fourth quarter 2011, non-seasonally adjusted).

These gains were broadly distributed around the US. The FHFA indexes for all 9 Census divisions were up on a year over year basis and 7 of 9 were ahead for the month. The CS indexes showed all 20 cities in the composite index up for the month and only New York down slightly on a year over year basis. Both FHFA and CS show all regional markets safely above their cyclical troughs.

After a long challenging period this is an impressive end to 2012 for house prices. We expect 2013 to be a continuation of the gains made in 2012 with further improvement in the overall housing sector.

For full histories of the 20 markets included in the Case-Shiller composite, click here cs.

For full histories of the FHFA US and 9 Census regions, click here fhfa9.

For full histories of the FHFA 50 state level house price indexes, click here fhfa50.

 

Case-Shiller Monthly House Price Indexes – It’s Time To Talk About Seasonal Adjustment

The S&P/Case-Shiller (CS) monthly home price indexes covering the 10 city and 20 city composites, and the component cities were released today for October. Both the 10 and 20 city composites posted small declines for October over September (both -0.1% on a non-seasonally adjusted basis – S&P’s headline measure), after decelerating from peak growth rates in June. The monthly growth rates for the 10 and 20 city composites in June were 2.1% and 2.3%, respectively. The number of component cities with positive monthly price growth dropped from all 20 cities to 8 between June and October.

No alarm bells, please. This is not a reversal of recent improvements or renewed deterioration in housing market conditions. It is the well-recognized seasonal pattern in housing markets. And we should expect to see similar softening in non-seasonally adjusted (NSA) housing data as we move through the winter months.

A more informative way to evaluate NSA data is to consider the current level compared to the same time last year, thus removing seasonal effects. On this basis the 10 and 20 city composites are up 3.4% and 4.3%, respectively, from last October. Eighteen of the 20 cities are above last October’s level, representing a much better performance than the monthly numbers suggest.

And given both the seasonal patterns and the varying degrees of housing boom and bust cycle experienced across markets it is worth considering where prices are now compared to where they hit bottom in any market. By this measure all 20 composite cities have hit bottom and turned around with increases ranging from 5% to 24% and averaging 12%.

But any of these simple statistics can present misleading signals. The healthiest markets are not necessarily the markets showing the most improvement. The Denver and Dallas markets post modest gains because they were the most immune to the boom and bust cycle. At the other extreme Phoenix and Detroit have among the strongest gains but with very different underlying historical experiences. The best analysis is to consider the full and most recent history of the price indexes in any given market.

For full histories of the 10 and 20 city composites and the component cities click here cs.

 

Case-Shiller House Price Indexes – Phoenix? Really?

The S&P/Case-Shiller (CS) monthly home price indexes for the 10 city and 20 city composites, and the component cities were released last week for August. The usual coverage of this release includes how far up or down the composites are compared to last month and last year, and how many of the component cities are up or down and how much. The numbers this month are encouraging. Both composite indexes are up 0.9% in August from July (not seasonally adjusted), the 10 city composite is up 1.3% and the 20 city composite is up 2.0% from August last year. Among the component cities, all but Seattle are up from last month, and 17 of 20 cities are up from last year. It is true that house prices in markets around the country are improving, but this narrow focus is not the best way to understand the level of improvement.

First of all, Seattle is fine. House prices are down 0.1% from July but up 3.4% from last year and after taking seasonal patterns into account it looks like prices have turned the corner after having trended downward until as recently as early this year.

A second point is that these indexes are not seasonally adjusted so it’s not surprising that they are all posting solid gains over the last several releases which average the spring and summer months, the height of the selling season. And it shouldn’t be a surprise going forward when the indexes weaken as the releases cover prices from the fall and winter months. It will be reflecting the highly seasonal nature of home prices, not widespread deterioration in housing market conditions.

And the 3 cities not showing annual growth, Atlanta, Chicago and New York, they are all posting bigger gains in year to date price growth than at this point last year.

The focus on these narrow metrics, monthly and annual changes in not seasonally adjusted house prices, led to the S&P Dow Jones press release announcing that Phoenix, with 18.8% annual growth, is the best performing city among the 20 cities followed. I would have picked Washington, DC. The annual growth was only 4.3%, but house prices in that market rose more, fell less, and have been recovering for 41 months compared to 11 months in Phoenix.

So it’s worth stepping back and thinking about what these indexes are supposed to be telling us. In the short term the monthly and annual comparisons may be telling us less than we think. Over the medium term the indexes are indicating which markets are putting together a sustainable recovery in house prices and by extension broader economic and housing market recoveries. Over the longer term these indexes show how prices have adjusted to balance the supply of and demand for housing given the underlying long term fundamentals of population and job growth in 20 local economies.

When interpreting these price indexes it’s important to have the right perspective.

For full histories of the composites and 20 markets included in the Case-Shiller composites, click here cs.

 

Case-Shiller and FHFA House Price Indexes – Solid 2012 Gains So Far

Both S&P/Case-Shiller (CS) and the Federal Housing Finance Agency (FHFA) released monthly home price indexes for July today. Both organizations reported solid gains in house prices continuing so far this year. The CS 10 and 20 city composite indexes posted 1.5% and 1.6% gains respectively in July over June, bringing the year to date increases to 6.3% and 6.9% (on the non-seasonally adjusted basis they focus on). FHFA reported a less robust 0.2% increase nationally from June to July and a 4.1% increase so far this year (on the seasonally adjusted basis they focus on).

The non-seasonally adjusted data typically shows higher peaks and lower troughs throughout the year due to the highly seasonal nature of the housing sector. It’s also true that historically the CS composites have shown more extreme highs and lows than both the CS and FHFA national indexes. This is due in part to the inclusion of some of the most volatile markets among the 20 cities in the composites, and less averaging out than the national indexes.

All 20 cities in the CS composites posted gains for July, perhaps unsurprisingly given the non-seasonally adjusted data and summer being the height of the selling season. But summer has brought no guarantee of rising prices in these markets in the last few years and the most encouraging signal in this release is that the year to date increases so far in 2012 are stronger than in prior years suggesting this is fundamental improvement rather than pure seasonality.

Among the 9 Census divisions reported by the FHFA, 3 posted modest declines for July, but 8 of the 9 have shown good progress so far this year. The Middle Atlantic division, including New York, New Jersey and Pennsylvania, while still positive has the weakest growth of the divisions.

For full histories of the 20 markets included in the Case-Shiller composite, click here cs.

For full histories of the FHFA US and 9 Census regions, click here fhfa9.

Home Prices Continue Positive Trend

The Case-Shiller indexes of home prices increased again when compared to the previous month or the previous year. Both the 10-city and 20-city seasonally-adjusted (SA) indexes rose 1% and 0.9% respectively from May to June 2012. This is the fifth straight month for steady increases in the SA indexes. Since January, the 10-city and 20-city indexes have risen 3.5% and 3.6% respectively. All but two metro areas also showed positive SA May to June changes. Dallas and Charlotte declined 0.1%

The year-over-year changes were also much more encouraging than previous reports. At 0.1% and 0.5% respectively, the 10-city and 20-city annual changes were the first positive numbers since the end of the home buyer tax credit in 2010. Thirteen of the 20 metro areas experienced year-over-year increases and the seven that saw negatives were smaller (less decline) than the previous year-over-year comparisons.

Some of the positive news is the result of adjustments from extremes. The largest peak to trough drop in home prices among the 20 metros was in Miami where prices fell 64% from December 2006 to April 2011. From June 2011 to June 2012, prices increased 4.4%, third best increase of the 20 metro areas in the index. Charlotte had one of the smallest total falls at 26% from August 2007 to February 2012 while the most recent year-over-year change was 0.8%, the smallest of the positive annual increases. The relationship is mild as can be seen in the linear approximation on the graph, but does suggest some relationship between maximum decline and recent recovery.

As economic curing continues across a broader segment of the country and the inventory of both existing and new homes dwindles, NAHB expects modest home prices increases to continue with some stronger improvement in the places that had the largest declines.

Case-Shiller House Price Indexes for May – Encouraging Signals

Tuesday’s release of the Case-Shiller house price indexes includes data for May for the monthly 20 and 10 city composite indexes and the component city indexes (the national index is released quarterly). Both composites increased in May from April by 2.2 percent and all 20 component indexes increased for the month, ranging from 0.4 percent in Detroit to 4.5 percent in Chicago (on a non-seasonally adjusted basis). The 20 and 10 city composites were down from year ago levels, by 0.7 percent and 1.0 percent, respectively. Twelve of the component city indexes were above last May’s levels while eight were below.

It’s common in analyses of these indexes to report monthly changes and the change from the same month one year ago. But it is more instructive to examine the movements in the indexes from a broader perspective, rather than these two simple statistics. For example, given that this release includes data averaged over March, April and May, the traditional period when this very seasonally sector begins to pick up, and the data is not seasonally adjusted, it’s not surprising to find all the indexes, components and composites increasing. The monthly improvement could be reflecting typical seasonal variation rather than underlying trends. Another consideration is that comparisons to a year ago are dependent on the consistency of the seasonal pattern.

Looking at the indexes from a broader perspective it’s encouraging to note that the indexes for Los Angeles, San Diego and Cleveland, within strong seasonal patterns, despite being lower than in May of last year, have shown stronger growth from their preceding winter troughs in the first five months of this year, just from a lower base. House prices in Los Angeles have risen 3.9 percent so far this year compared to 0.8 percent last year.

Similarly, a better signal of strengthening house prices relative to last year in San Francisco, Miami and Tampa is not that the indexes are modestly higher but that the growth so far this year is considerably stronger.

House prices in Denver, Washington DC, and Dallas are 3 percent to 4 percent higher than in May of last year, while in Boston they are down slightly, but it’s more important to recognize that these markets are entering a fourth year of price stability. The Charlotte, Minneapolis and Cleveland markets are also showing signs of leveling off, seasonality notwithstanding.

In contrast, the spring strength in the Atlanta, Chicago, and New York markets may not be the last word. Monthly house price growth in Chicago was the highest among the 20 cities.

Whether house prices in Detroit, Portland and Seattle are really turning around remains to be seen given their recent histories, but the absence of seasonal patterns and continuing improvement in Phoenix as well as the recent improvement in Las Vegas, two of the hardest hit housing markets, are definitely encouraging signs. The turnaround in house prices in Las Vegas is positive news regardless of the level last year (down 3.2 percent).

So the lesson is that when trying to understand trends in house prices using the Case-Shiller indexes, the 20 market scorecard of monthly and year ago changes is less informative than a good hard look at the data and careful interpretation of the trends underneath the seasonal patterns.

For full histories of the 20 markets included in the Case-Shiller composite, click here cs.

 

Case-Shiller House Price Indexes – New Lows Or Stabilization?

Both. This month’s release of the Case-Shiller house price indexes includes March values for the monthly 20 and 10 city composite indexes (and component cities) and first quarter values for the national index.

The national (not seasonally adjusted) index shows prices down 2.0 percent in the first quarter of 2012 from the fourth quarter of 2011, and down 1.9 percent from the first quarter of last year. The 20 and 10 city composites show prices basically flat between February and March (0.0 percent and -0.1 percent, respectively), and down 2.6 percent and 2.8 percent, respectively, from March of last year.

Technically, the declines bring these three indexes to new lows from the recent bust. But it’s clear that the broader pattern in the indexes is a sharp deceleration from the earlier declines and a general flattening of the trend (with the exception of the clear seasonal pattern). Most analysts are describing house prices as stabilizing with the caveat of possible future small declines.

Across the 20 cities included in the composites the signals are more upbeat. Twelve of the 20 markets posted increases for the month, while 7 were above year ago levels. This is a considerable improvement from January and February when prices were softening. The three California markets, San Diego, Los Angeles and San Francisco, and Washington DC, posted gains in March. This is particularly encouraging because these markets were among the top performers but weakened significantly over last winter. Miami and Tampa posted gains providing hope that these Florida markets may have finally hit bottom. Phoenix added to a string of monthly gains, leaving Las Vegas as the lone market in the bubble states that has yet to show signs of recovery.

In terms of new lows, only 5 of the 20 markets set new lows with the March data: Atlanta, Chicago, Las Vegas, New York and Portland. Of the 15 markets that remain above an earlier trough average growth has accelerated in the last 3 months and the average length of time since the trough is 20 months.

For full histories of the 20 markets included in the Case-Shiller composite, click here cs.