With this morning’s release of the April S&P/Case-Shiller Home Price we learned that home prices continued their rise across the country over the last 12 months but at a slightly lower pace.
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 up 0.3% over the previous month, down from 1.0% and 1.1% the two previous months.
Here is an excerpt of the analysis from today’s Standard & Poor’s press release.
“Home prices continue to rise across the country, but the pace is not accelerating,†says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Moreover, consumer expectations are consistent with the current pace of price increases. A recent national survey published by the New York Fed showed the average expected price increase among both owners and renters is 4.1%. Both the current rate of home price increases and the consumers’ expectations are a bit lower than the long term annual price change of 4.9% since 1975. These figures, however, do not adjust for inflation. The real, or inflation adjusted, price change since 1975 is one percent per year. Given the current inflation rate of under two percent, real home prices today are rising more quickly than is typical. The three out of five consumers in the survey who see home ownership as a good or somewhat good investment may be thinking in real terms. [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 nonseasonally 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 headline inflation using the Bureau of Labor Statistics’ Consumer Price Index as the deflator. Among other things, the real version gives a better sense of the dynamics of the residential real estate bubble that preceded the last recession.
