Two Quarterly Price Reports, Two Conclusions

The S&P Case-Shiller National homernprice index and the Federal Housing Finance Agency's Home Price Index (HPI),rnboth issued on Tuesday, diverged sharply on the direction of home prices duringrnthe fourth quarter of 2013.  The FHFA HPIrnshows an increase of 1.2 percent compared to the third quarter whilernCase-Shiller's National number moved in the opposite direction.</p

The Case-Shiller index of National homernprices, a quarterly index which covers all nine U.S. census divisions, rosern11.3 percent from the fourth quarter of 2012, a slight improvement over thern11.2 percent annual increase in the third quarter of 2013.  However the fourth quarter index was down 0.3rnpercent from that third quarter level.  </p

The Case-Shiller 10- and 20-CityrnComposite Indices were flat in December with the 10-City unchanged and thern20-City posting its second small monthly decline of 0.1 percent.  The two indices still posted healthy annualrngains of 13.6 percent and 13.4 percent respectively although these increasesrnwere about 30 basis points below the annual gains reported in November.  </p

Graphic, page 1</p

David M. Blitzer, Chairman of the Index Committeernat S&P Dow Jones said this was the best year for the index since 2005.  “However, gains are slowing fromrnmonth-to-month and the strongest part of the recovery in home values may be over.  Year-over-year values for the two monthlyrnComposites weakened and the quarterly National Index barely improved.  The seasonally adjusted data also exhibitsrnsome softness and loss of momentum.”</p

Despite the flat composite results a fewrncities still pulled out month-over-month increases especially Miami which shotrnup 0.9 percent.  Las Vegas rose 0.4rnpercent and Tampa 0.3 percent.  LosrnAngeles, San Francisco, and Washington all posted gains of 0.2 percent.  The largest monthly declines were in Clevelandrn(-1.2 percent), Minneapolis (-0.7 percent), Chicago (-0.5 percent), and Phoenixrnand New York (-0.3 percent).</p

Thirteen of the 20 cities in therncomposite indices had double digit annual appreciation led by Las Vegas at 25.5rnpercent and San Francisco at 22.6 percent. rnPrices rose 20.3 percent in Los Angles and 18 percent in Atlanta and SanrnDiego.  The smallest annual increasesrnamong the 20 cities were in Cleveland (4.5 percent), New York (6.3 percent) andrnCharlotte (7.8 percent)</p

“Recent economic reports suggest arnbleaker picture for housing, “Blitzer said. rn”Existing home sales fell 5.1 percent in January from December to thernslowest pace in over a year.  Permits forrnnew residential construction and housing starts were both down and below expectations.  Some of the weakness reflects the cold weatherrnin much of the country.  However higherrnhome prices and mortgage rates are taking a toll on affordability.”</p

Graph, p 2</p

Case-Shiller says that home prices arernback to spring 2004 levels and measured from their June/July 2006 peaks the tworncomposites are still down about 20 percent. rnTheir recovery from March 2012 lows is 23-24 percent. </p

The 1.2 percent quarterly increase inrnits HPI reported by FHFA was the tenth consecutive quarterly increase.  Principal Economist Andrew Leventis said, “Homernprice appreciation in the fourth quarter was considerable, but more modest thanrnin recent periods.  It is too early tornknow whether the lower quarterly growth rate represents the beginning of morernnormalized price appreciation patterns or a more significant slowdown.”</p

The seasonally adjusted, purchase onlyrnHPI rose 7.7 percent from the fourth quarter of 2012 to the fourth quarter ofrn2013.  The cost of other goods andrnservices were up only 0.7 percent over the same period, therefore inflation adjustedrnhome prices were up 7.0 percent.  Pricesrnin December rose 0.8 percent compared to November.</p

Quarterly & monthlyrnincreases – p 5</p

FHFA's expanded-data price index, a measurernthat adds transaction information from county recorders and the Federal HousingrnAdministration to the FHFA information, rose 1.2 percent from the previousrnquarter as well and was up 7.8 percent from the 4^th quarter of 2012.</p

The seasonally adjusted, purchase-onlyrnHPI rose in 38 states in the fourth quarter, down from 48 states in the thirdrnquarter.  Nevada, California, Arizona,rnOregon, and Florida posted the largest annual gains.</p

Two of the nine census regions, New England,rnand the Middle Atlantic, had monthly decreases (-0.5 and -0.6 respectively) inrntheir HPI.  The largest increase was inrnthe West South Central region which was up 2.0 percent, and the East SouthrnCentral, up 1.6 percent.   All ninernregions posted increases on an annual basis with the smallest rise in thernMiddle Atlantic at 2.1 percent followed by New England at 2.7 percent.  The largest jumps in the HPI were in thernPacific and Mountain Regions at 14.9 percent and 12.6 percent respectively.</p

The S&P Case Shiller indices combinernmatched price pairs for thousands of individual arms-length sales transactionsrnwith a value-weighted average of the cities in each index.  The composites have a base value of 100 inrnJanuary 2000, thus a current index value of 150 translates to a 50 percentrnappreciation rate since that date for a typical home in the subjectrnmarket.  As of December only Detroitrnremains below the base with an index of 93.63. rnThe FHFA HPI is based on data for more than 6 million repeat salesrntransactions financed with Fannie Mae or Freddie Mac mortgages. </p

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