The non-seasonally adjusted Case-Shiller home price index (20 cities) year-over-year rate of home price growth was declined from 5.9 % to 5.7 %. The index authors stated “Since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up.”.
Analyst Opinion of Case-Shiller HPI
Many pundits believe home prices are back in a bubble. Maybe, but the falling inventory of homes for sale keeps home prices relatively high. I continue to see this a situation of supply and demand. It is the affordability of the homes which is becoming an issue for the lower segments of consumers.
- 20 city unadjusted home price rate of growth declined 0.2 % month-over-month. [Econintersect uses the change in year-over-year growth from month-to-month to calculate the change in rate of growth]
- Note that Case-Shiller index is an average of the last three months of data.
- The market expected:
| Â | Consensus Range | Consensus | Actual |
| 20-city, SA – M/M | 0.3 % to 1.0 % | 0.6 % | +0.3 % |
| 20-city, NSA – M/M | Â | Â | +0.9 % |
| 20-city, NSA – Yr/Yr | 5.8 % to 6.1 % | 5.9 % | +5.7 % |
S&P/Case-Shiller Home Price Indices Year-over-Year Change
Comparing all the home price indices, it needs to be understood each of the indices uses a unique methodology in compiling their index – and no index is perfect.
The way to understand the dynamics of home prices is to watch the direction of the rate of change. Here home price growth generally appears to stabilize (rate of growth not rising or falling).
There are some differences between the indices on the rate of “recovery” of home prices.
A synopsis of Authors of the Leading Indices:
Case Shiller’s David M. Blitzer, Chairman of the Index Committee at S&P Indices:
As home prices continue rising faster than inflation, two questions are being asked: why? And, could this be a bubble? Since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up. The increase in real, or inflation-adjusted, home prices in the last three years shows that demand is rising. At the same time, the supply of homes for sale has barely kept pace with demand and the inventory of new or existing homes for sale shrunk down to only a fourmonth supply. Adding to price pressures, mortgage rates remain close to 4% and affordability is not a significant issue.
The question is not if home prices can climb without any limit; they can’t. Rather, will home price gains gently slow or will they crash and take the economy down with them? For the moment, conditions appear favorable for avoiding a crash. Housing starts are trending higher and rising prices may encourage some homeowners to sell. Moreover, mortgage default rates are low and household debt levels are manageable. Total mortgage debt outstanding is $14.4 trillion, about $400 billion below the record set in 2008. Any increase in mortgage interest rates would dampen demand. Household finances should be able to weather a fairly large price drop.”
