Home Price Gains Prepping for Resurgence?

In its report for October S&P Dow Jones again points to the slowing acceleration of home prices through much of the U.S., but this time said there are indications that deceleration may be nearing an end.  All three of the company's Case-Shiller Home Price Indices (HPIs) showed smaller levels of appreciation from October 2013 to October 2014 than they had shown year-over-year in September but a substantial subset of metropolitan areas within those indices reported growing gains. 

The 10-City Composite HPI increased 4.4 percent compared to the previous October where the annual gain in September had been 4.7 percent.  The 20-City Composite was up 4.5 percent from a year earlier compared to 4.8 percent the prior month.  The Case-Shiller U.S. National HPI which covers the nine census divisions increased by 4.6 percent, 2 basis points less than the gain in September. 

Eight cities bucked the national trend, showing greater annual appreciation in October than in September.  These included San Francisco, Denver, and Tampa.  The greatest depreciation over the last year was in Las Vegas where the HPI was down 1.2 percent.

All three indices were also down on a month-over-month basis.  Both the 10- and 20-City Composites were 0.1 percent below their September level while the National Index lost 0.2 percent.  San Francisco and Tampa gained 0.8 percent each while Chicago and Cleveland had monthly decreases of 1.0 percent and 0.7 percent respectively. Overall the 20 cities reported mixed results, ten had lower figures, eight reported increases and two were unchanged. 

"After a long period when home prices rose, but at a slower pace with each passing month, we are seeing hints that prices could end 2014 on a strong note and accelerate into 2015," says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. "Two months ago, all 20 cities were experiencing weakening annual price increases. Last month 18 experienced weakness. This time, 12 cities had weaker annual price growth, but eight saw the pace of price gains pick up.  Seasonally adjusted, all 20 cities had higher prices than a month ago.

"Most national economic statistics, other than those connected to housing, posted positive reports in November and early December. Third quarter GDP was revised to 5% real growth at annual rates, and unemployment was at 5.8% as payrolls added over 300,000 jobs in November. Housing was somber: housing starts pulled back 1.6%, existing home sales were at 4.93 million, down 6.1%, and new home sales were 438,000, down 1.6%, all in November."

Average home prices in the 10- and 20-City Composite Indices are back to their autumn 2004 levels and are down 16 to 17 percent from the peaks they reached in June or July 2006.  The recovery from the March 2012 lows are 28.5% and 29.3% for the 10-City and 20-City Composites respectively.

The S&P Case-Shiller HPIs are constructed to track the prices of typical single-family homes in each of the cities in their sample.  Each index combines matched price pairs for thousands of individual houses from the available universe of arms-length sales data. The S&P/Case-Shiller National U.S. Home Price Index tracks the value of single-family housing within the United States. The indices have a base value of 100 in January 2000; thus, for example, a current index value of 150 translates to a 50% appreciation rate since January 2000 for a typical home located within the subject market.