With this morning's release of the July S&P/Case-Shiller Home Price we learned that seasonally adjusted home prices for the benchmark 20-city index were down fractionally month over month for the third consecutive month at -0.2%. However, the year-over-year change has hovered between 4.9% and 5% for six months. Price growth, we're told, is mostly in the west.
The adjacent column chart illustrates the month-over-month change in the seasonally adjusted 20-city index, which tends to be the most closely watched of the Case-Shiller series. It was down -0.2% from the previous month. The nonseasonally adjusted index was up 5.0% year-over-year.
Investing.com had forecast a 0.1% MoM seasonally adjusted increase and 5.1% YoY nonseasonally adjusted for the 20-city series.
Here is an excerpt of the analysis from today's Standard & Poor's press release.
“Prices of existing homes and housing overall are seeing strong growth and contributing to recent solid growth for the economy,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The S&P/Case Shiller National Home Price Index has risen at a 4% or higher annual rate since September 2012, well ahead of inflation. Most of the strength is focused on states west of the Mississippi. The three cities with the largest cumulative price increases since January 2000 are all in California: Los Angeles (138%), San Francisco (116%) and San Diego (115%). The two smallest gains since January 2000 are Detroit (3%) and Cleveland (10%). The Sunbelt cities – Miami, Tampa, Phoenix and Las Vegas – which were the poster children of the housing boom have yet to make new all-time highs.
“The economy grew at a 3.9% real annual rate in the second quarter of 2015 with housing making a major contribution.
Residential investment grew at annual real rates of 9-10% in the last three quarters (2014:4 th quarter, 2015:1 st -2 nd quarters), far faster than total GDP. Further, expenditures on furniture and household equipment, a sector that depends on home sales and housing construction, also surpassed total GDP growth rates. Other positive indicators of current and expected future housing activity include gains in sales of new and existing housing and the National Association of Home Builders sentiment index. An interest rate increase by the Federal Reserve, now expected in December by many analysts, is not likely to derail the strong housing performance.” [Link to source]
The chart below is an overlay of the Case-Shiller 10- and 20-City Composite Indexes along with the national index since 1987, the first year that the 10-City Composite was tracked. Note that the 20-City, which is probably the most closely watched of the three, dates from 2000. We've used the seasonally adjusted data for this illustration.
For an understanding of the home price data over longer time frames, we think a real, inflation-adjusted visualization of the data is an absolute necessity. Here is the same chart as the one above adjusted for inflation using a subcomponent of Bureau of Labor Statistics' Consumer Price Index, the owners' equivalent rent of residences, as the deflator. Among other things, the real version gives a better sense of the dynamics of the real estate bubble that preceded the last recession.
The next chart shows the year-over-year Case-Shiller series, again using the seasonally adjusted data.
Here is the same year-over-year overlay adjusted for inflation with the Consumer Price Index owners' equivalent rent of residences.
For a long-term perspective on home prices, here is a look at the seasonally and inflation-adjusted Case-Shiller price index from 1953, the first year that monthly data is available. Because the CPI owners' equivalent rent of residences didn't start until 1983, we've used the broader seasonally adjusted Consumer Price Index.
