House Prices End the Year Higher

February 25, 2014

Data from Standard and Poor’s indicates that house prices rose in December 2013. According to the release, the seasonally adjusted S&P/Case-Shiller HPI – 20 City Composite rose by 0.8% in December 2013. This is the 23rd consecutive month-over-month increase for the Index. Over this time period, the Index has risen by 21.7%. For the entire year of 2013, the 20 City Composite Index grew by 13.4%.

The Federal Housing Finance Agency (FHFA) also released data on house prices. According to its seasonally adjusted House Price Index – Purchase-Only, house prices rose by 0.8% in December 2013. The FHFA House Price Index – Purchase-Only has now increased for for 24 of the past 26 months, rising by 14.8% during this period. Over the year, the FHFA House Price Index – Purchase-Only has climbed by 7.7%. As Figure 1 shows, following the 15.3% increase in the FHFA House Price Index – Purchase-Only that took place between April 2011 and December 2013, house prices are roughly the same as the level recorded in May 2005 and are now at 92% of the peak level reached in March 2007.

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A previous post demonstrated that the recovery in house prices is a key contributor to the renewed expansion in housing equity. In a related fashion, rising house prices should also help expand the amount of homeowners with positive housing equity, shrinking the amount with negative housing equity. Figure 2 juxtaposes the FHFA House Price Index – Purchase-Only data displayed in Figure 1 onto a chart depicting the share of homes with negative housing equity. According to this chart, house prices in December 2011 were at 81% of their March 2007 peak. By September 2013, house prices reached 91% of this peak level. At the same time, the share of homes with negative equity reached 25.2% by the end of the fourth quarter of 2011. However, by the end of the third quarter of 2013, the share of homes with negative equity had fallen to 13.0%. Given that the FHFA House Price Index – Purchase Only ended the fourth quarter of 2013 at 92% of its peak, the share of homes with negative housing equity is expected to end the year even lower.

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

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


House Prices Continue To Climb

September 25, 2013

House prices continued to rise in July, contributing to the overall recovery in the housing market. According to the most recent release by the Federal Housing Finance Agency, U.S. house prices rose by 1.0% on a month-over-month seasonally adjusted basis in July. This is the 18th consecutive monthly increase for the House Price Index – Purchase Only. Since January 2012, house prices have risen by 12.5%.

Meanwhile, Standard and Poor’s also reported that house prices rose in July. According to the most recent release, the S&P/Case-Shiller House Price Index –20 City Composite grew by 12.4% over the past year. This is the 14th consecutive year-over-year increase registered by the index. Since March 2012, house prices, as measured by the S&P/Case-Shiller House Price Index, have risen by 21.2%.

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According to the FHFA, house prices nationally are 14% above the trough reached in April 2007. However, they remain 10% away from their pre-recession peak. As Chart 2 illustrates, home prices in most areas have exhibited a sustained recovery, but have not yet returned to their pre-recession peak, a situation that keeps a portion of homeowners in a negative housing equity position.

Chart 2 also indicates that the regions of the country with the largest increases typically still have the most to rise before reaching their peak level. For example, house prices in the Pacific region have climbed by 27% from their trough, but house prices in that region are still 23% below their peak level.  The Pacific region includes Hawaii, Alaska, Washington, Oregon, and California. According to Standard and Poor’s/Case-Shiller, house prices in Los Angeles, San Diego, and San Francisco have risen by 30%, 30%, and 50% from their respective troughs, but house prices in these cities remain 25%, 25%, and 19% away from their respective peaks. House prices in Seattle have risen by 28% from their trough, but are 17% below their peak level.

In contrast, house prices in the West South Central region of the country have fully recovered their pre-recession peak level. As of July 2013, house prices in this region are 12% above their trough and, despite the recent month-over-month decline, are 7% above their pre-recession peak. The West South Central region is composed of Oklahoma, Arkansas, Texas, and Louisiana. According to Standard and Poor’s/Case-Shiller, house prices in Dallas are currently 17% above their trough and 4% above their June 2007 peak.

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

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


House Prices Remain On A Path toward Recovery

August 27, 2013

Standard and Poor’s reported that house prices rose in June. According to the most recent release, the S&P/Case-Shiller House Price Index – National Index grew by 7.1% on a not seasonally adjusted basis in the second quarter and 10.1% over the previous four quarters. The House Price Index – 20 City Composite grew by 12.1% over the past year as all 20 cities posted annual gains. Year-over-year house price growth was strongest in Las Vegas, 24.9%, San Francisco, 24.5%, Los Angeles, 19.9%, and Phoenix, 19.8%. Meanwhile, house prices in New York rose by 3.3%.

Standard & Poor’s calculates tiered house price indexes for 17 cities included in its House Price Index – 20 City Composite. Tiered house price indexes for Cleveland 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. An earlier post illustrated that house prices in the low tier experienced the largest decline following the housing boom, but are currently recording the strongest post-trough increases.

However, an alternative method for evaluating the housing market recovery is to examine current prices relative to their peaks. Geographically, this analysis demonstrated that house prices in Dallas and Denver have surpassed their boom peak levels while house prices in cities such as Phoenix and Las Vegas, which have climbed the most from their low, are still well below the peak levels reached during the boom period. This analysis can also be performed across house price tiers with similar results. Although low tier house prices have climbed highest from their trough, high tier house prices tend to be closest to their boom-time peaks. The chart below shows that in every city except for Denver and Portland, high tier house prices are closest to their boom-peaks. In Denver and Portland, the distance between current prices and boom peak prices is roughly the same across all three price tiers, while, in Denver specifically, the low and medium tier house prices have surpassed the highest level reached during the housing boom and house prices in the high tier are 98% of their boom peak level.

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The gyration in house prices across house price tiers largely reflects the implications of life cycle dynamics for the housing market. Higher priced homes tend to be inhabited by older, more financially-established households with higher levels of housing equity. In contrast, lower priced homes tend to be purchased by younger households with less housing equity. As a result, significant house price declines like those experienced during the recent housing bust will completely erode equity, invite foreclosure, amplify downward pressure on prices and thus have a larger impact on house prices in the lowest tier. However, going forward, house prices in the low-tier should continue to rise as many of these households return to the housing market.

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


House Prices Move Higher

June 25, 2013

Nationally, house prices continued to rise in April, contributing to the overall recovery in U.S. house prices. According to the most recent release by the Federal Housing Finance Agency, U.S. house prices rose by 0.7% on a month-over-month seasonally adjusted basis in April. This is the fifteenth consecutive monthly increase for the House Price Index – Purchase Only. Since January 2012, house prices have risen by 9.9%.

The April increase in house prices was geographically widespread, increasing in every division of the country. As Chart 1 illustrates, the largest gains took place in the Pacific and Mountain divisions, regions of the country containing states, like Nevada and California, that experienced the largest price declines.

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Meanwhile, Standard and Poor’s reported that its house price index also rose in April. According to the most recent release, the S&P/Case-Shiller House Price Index – 20-City Composite grew by 12.1% on a year-over-year not seasonally adjusted basis. Following 20 consecutive months of year-over-year declines, house prices registered their eleventh consecutive year-over-year increase in April. House price growth in San Francisco, a city in the Pacific region, and in Las Vegas, a city in the Mountain region, eclipsed house price growth in Phoenix, a city in the Mountain region. However, as chart 2 illustrates, each of these cities in addition to Atlanta experienced year-over-year house price growth greater than 20.0%. April is the eighth consecutive month that Phoenix has experienced a 12-month price increase greater than 20.0%.

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Rising house prices for existing homes, such as those counted in the FHFA and in the S&P/Case-Shiller House Price Indices, is a net positive for the housing recovery. Recovering prices will improve conditions for builders, lead to higher inventories of new construction, and motivate potential sellers of existing houses to come back into the market. Data released jointly by the US Census Bureau and the US Department of Housing and Urban Development showed that newly constructed single-family houses sold at a seasonally adjusted annual rate of 476,000 in May, 2.1% higher than level of new single-family houses sold in April. Going forward we expect house prices to continue to rise, by 9.5% overall in 2013 and by 4.5% in 2014.

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 fhfa.


House Prices Continue Upward “March”

May 28, 2013

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.

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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.

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House Price Growth Is Accelerating

May 1, 2013

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.

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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.

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House Price Increases Widespread

March 26, 2013

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.Presentation1

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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.

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