S&P/Case Shiller Home Prices Rise, Feeding Optimism of a Housing Recovery

Home prices as measured by the S&P/Case-Shiller Home Price Indices rose across the board in July with both the 10- and 20-City Composites and all 20 cities included in them rising for the third consecutive month.  The 10-City Composite Index was up 1.5 percent over June numbers and the 20-City Composite rose 1.6 percent.  It was actually the fourth consecutive months that prices had increased for the Composites and 19 of the cities; Detroit had experienced a dip in April.

On an annual basis the 10-City index was up 0.6 percent and the 20-City 1.2 percent.  The 10-City annual number was unchanged in June and the 20-City had posted a +0.6 percent change.  Annual increases were noted in July for 15 of the cities, two were unchanged and three, Cleveland, Detroit, and New York had smaller changes than year earlier although both Cleveland and Detroit were still in positive numbers.   

"Home prices increased again in July," David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices said.  "All 20 cities and both Composites were up on the month for the third time in a row.  Even better, 15 of the 20 cities and both Composites rose over the last year.  Atlanta remains the weakest city but managed to cut the annual loss to just fewer than 10 percent."

"The news on home prices in this report confirms recent good news about housing.  Single family housing starts are well ahead of last year's pace, existing home sales are up, the inventory of homes for sale is down and foreclosure activity is slowing.  All in all, we are more optimistic about housing.  Upbeat trends continue.  For the third time in a row, all 20 cities and both Composites had monthly gains.  Stronger housing numbers are a positive factor for other measures including consumer confidence," Blitzer said.

As of July, average home prices across the U.S. are back to summer and autumn 2003 levels for the 10-Cithy and 20-City Composites respectively.  Measured from their June/July 2006 peaks both Composites are down approximately 30 percent and are up between 7.5 and 8.0 percent from the troughs that occurred earlier this year.

Among the 20 cities, all of which posted monthly gains, fifteen were up more than 1.0 percent.  Miami was up 2.1 percent and was the sole MSA to have a larger gain in July than in June.  San Diego prices were up 1.1 percent, the same as in June while the other 18 cities and both composites, while having positive monthly numbers, were below the price increases in June.

Blitzer said, "Among the cities, Miami and Phoenix are both well off their bottoms with positive monthly gains since the end of 2011.  Many of the markets we follow have seen some decent recovery from their respective lows - San Francisco up 20.4 percent, Detroit up 19.7 percent, Phoenix up 17.0 percent, and Minneapolis up 16.5 percent, to name the top few.  These were some of the markets that were hit the hardest when the housing bubble burst in 2006.  The 10-City has increased 7.4 percent and the 20-City 7.8 percent since their recent lows.  The positive news in both the monthly and annual rates of change in home prices over the past few months signals a possible recovery in the housing market."

Michael Woolfolk, Senior Currency Strategist, BNY Mellow, York said of the report, "Certainly, the attention is partly focused on housing, though the Fed's attention is primarily on unemployment. But the 1.2 percent rise in the composite price index was modestly better than expected. And keep in mind we've been getting a stream of third-quarter data that suggests the soft patch in the economy is in the rear view mirror. So this should contribute to growth in the third quarter and hopefully the fourth quarter."

Mike Gibbs, Co-head of the Equity Advisory Group at Raymond Jones in Memphis, Tennessee  says that the numbers show a continual recovery in the housing market which continues to progress.  "This could have a bigger impact on trading than other data we've seen lately.  Now that we've moved past the FOMC meeting, investors are returning their focus on the economy, which has shown signs of weakness."

The S&P/Case-Shiller Home Price Indices are constructed to track the price path of single-family homes located in the subject metropolitan areas.  Each index combines matched price pairs for thousands of individual houses from arms-length sales data.