S&P/Case Shiller: Home Prices Improving at Slower Pace

by devteam November 24th, 2009 | Share

Standard and Poor's released the Case Shiller Home Price Index this morning.

The S&P/Case-Shiller Home Price Indices are constructed to accurately track the price path of typical single-family homes located in each metropolitan area provided. Each index combines matched price pairs for thousands of individual houses from the available universe of arms-length single family homes sales data. The indices have a base value of 100 in January 2000; thus, for example, a current index value of 150 translates to a 50% appreciation rate since January 2000 for a typical home located within the subject market.

In last month's release, the S&P Case Shiller Home Price Index continued to improve as prices in 17 of 20 metro cities increased in August, albeit at a slower pace than July. Overall, the 20-city index rose 1.2%, better than economist expectations for a read of +0.7% and the 10-city home price index increased at a rate of 1.3%. Year over year the 20-city index was 11.3% lower, again better than the market's expectation of -11.9%.

In this month's release, U.S. home prices, as measured by the 20 city index rose by 0.3% on a month over month basis, less than the anticipated 0.8% gain.  The 10-city index rose 0.4% from August. According to S&P/Case Shiller data, home prices have risen for five straight months…but just as reported in August, appreciations are slowing and, as pointed out above, in August, 17 of 20 cities reported month over month appreciations whereas in September only 10 of 20 cities reported month over month improvements. More below.

In September, both the 10 and 20 city composites emerged from double-digit annual declines for the first time in 21 months.

On a year over year basis, the 20 city home price index is down 9.4%, a slightly larger decline than the 9.0% economists were expecting. The 10-city index is down 8.5% on a year over year basis. While annual returns are still negative for both the 10 and 20 city composites, improvement has been noted in every month of 2009.

Home prices in Q3 2009 are up 3.1 % from Q2 2009. As of the third quarter of 2009, home prices are near the same levels they were at in autumn of 2009. See below chart of the National Home Price Index…

David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s says…

“We have seen broad improvement in home prices for most of the past six months,”…”However, the gains in the most recent month are more modest than during the seasonally strong summer months. Fewer cities saw month to month improvements in September than in August in both seasonally adjusted and unadjusted figures. 

The below table illustrates Blitzer's point. Notice, in August, 17 of 20 cities showed month over month price improvements. In September, only 10 of 20 cities reported month over month price gains. Momentum is waining heading into the seasonally slow winter months…

We also got home price data from the Federal Housing Finance Agency today. The FHFA Home Price Index reports on prices for homes with mortgages backed by the GSEs.  The S&P/Case-Shillerrnindex covers all loan types and is much broader than the FHFA index.

After falling 0.5% in August, the FHFA Home Price Index was unchanged in September and the monthly change for the July-to-August period was revised to -0.5%, from an initial estimate of -0.3%. In the third quarter, home prices rose 0.2%. This is the first quarterly increase since Q2 2007.

The FHFA's seasonally adjusted purchase-only house price index, calculated using home sales price information from Fannie Mae and Freddie Mac-acquired mortgages, was 0.2% higher on a seasonally adjusted basis in the third quarter vs. the second quarter of 2009.

Prices rose 1.1% in the East North Central, 0.7% in the South Atlantic, 0.4% in New England and 0.1% in the Pacific.

Prices fell 2.1% in the East South Central, 1.2% in the Middle Atlantic, 0.7% in the Mountain region, and 0.1% in the West South Central.

On an annual basis, prices fell in all regions of the country and by 3.0% overall.

So the summer buying season helped improve home prices in the third quarter, but the pace of recovery slowed in August and September. Heading into the winter months, a typically slow buying season, the home buyer tax credit has been extended and mortgage rates are near record lows…will this be enough to boost home sales and support the trend of increasing asset prices?

The debate rages on….

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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