Home Prices Seasonally Higher: "Showed Mixed Signals"

Home prices pulled, at least temporarily, out of their downward spiral according to the S&P/Case-Shiller Home Price Indices (HPI) released on Tuesday.  The National Index rose 3.6 percent in the second quarter of 2011, increasing in each of the three months of the quarter following the first quarter when the index fell 4.1 percent.  S&P, however, attributes the recent improvement to seasonal market forces and, when seasonally adjusted, the increase is only 0.1 percent.  The National Index had hit a new low in the first quarter and, even with the second quarter improvement posted an annual decline of 5.9 percent when compared to the second quarter of 2010.

The S&P Indices are constructed to accurately track the price of a typical single-family home.  The National Index is a composite of home prices in the nine U.S. Census divisions and is calculated quarterly.  The 10-City Index is a value-weighted composite of 10 metropolitan statistical area (MSAs) indices and the 20-City Index covers 20 MSAs. These indices are calculated monthly. The indices were assigned a base value of 100 in January 2000, thus a current index value of 150 means a typical house has increased in value by 50 percent since the index was constructed.  The indices have now returned to 2003 levels.

At the end of June both the 10- and 20-City composites were up 1.1 percent from May and all of the MSAs increased except for Portland Oregon which was essentially unchanged.   On a non-seasonally adjusted basis, Minneapolis and Chicago showed the largest increases with each up 3.2 percent since May.  Twelve of the 20 MSAs increased in each of the last three months.

Both composite indices were down when compared to numbers one year earlier. The 10- and 20-City Composites posted annual rates of decline of 3.8 percent and 4.5 percent respectively.  Every MSA declined when compared to June 2010 with the largest drop recorded by Minneapolis (-10.8 percent) followed by Portland (-9.6 percent) and Phoenix (-9.3 percent.)  The smallest annual decrease was experienced by Washington DC (-1.2 percent), Boston (-2.1 percent) and Denver (-2.5).

"This month's report showed mixed signals for recovery in home prices," David M. Blitzer, Chairman of the Index Committee at S&P Indices said.  "Looking across the cities, eight bottomed in 2009 and have remained above their lows.  These include all of the California cities plus Dallas, Denver, and Washington, DC, all relatively strong markets.  At the other extreme, those which set new lows in 2011 include the four Sunbelt cities - Las Vegas, Miami, Phoenix and Tampa - as well as the weakest of all, Detroit.  These shifts suggest that we are back to regional housing markets, rather than a national housing market where everything rose and fell together."

S&P said that the June report as well as the one published last month showed unusually large revisions across the same MSAs, Detroit, New York, Tampa, and Washington DC, and they expect the current figures to experience similar revisions.  There are a number of factors contributing to these revisions, most of them leading to lags in recording deeds.