Tuesday, August 28, 2012

Increases in Case-Shiller Home Price Indexes for July and Second Quarter Set New Records

Here are some initial observations on today's report from S&P/Case-Shiller on its Home Price Indexes for July and Q2:

1. The 2.3% monthly increase in the Composite-20 Home Price Index in July was the highest monthly increase in the 12-year history of that index (it started in January 2000).

2. The 2.2% monthly increase in the Composite-10 Home Price Index in July matched the 2.2% increase in May, and marked the highest monthly increase in that index since June 2004, slightly more than eight years ago. 

3. The 6.9% increase in the quarterly Composite-US Home Price Index in the second quarter (compared to  Q1) was the highest quarterly increase in the 25-year history of that index going back to 1987.     

MP: More evidence that the U.S. housing market has passed the bottom and is now in a period of stabilization and recovery, hopefully one that is sustainable.   

18 Comments:

At 8/28/2012 9:02 AM, Blogger Che is dead said...

"Only half of the previously foreclosed homes owned by Fannie Mae are either on the market or being prepared for sale. The remaining properties are currently locked away in some step of the foreclosure system. The National Association of Realtors said in its existing home sales report Wednesday that its officials were pressuring government agencies to release more of their REO in markets short of inventory. Many market participants long claimed the government – including Fannie, Freddie Mac and the Department of Housing and Urban Development – are deliberately holding these homes off the market in order to get more for them when home prices recover." -- HousingWire

 
At 8/28/2012 9:32 AM, Blogger Ed R said...

And the overall home prices are still more than 30% below what they were in 2006 - 2007. It is entirely misleading to say these new Case-Shiller indexes have set any kind of "new records".

New housing construction is still down more than 65% from '06 - '07 peaks; and down more than 50% from 'normal' housing markets of 1999 to 2002.

 
At 8/28/2012 9:36 AM, Blogger Mark J. Perry said...

Headline has been changed to reflect the fact that it's the percentage increases in the Case-Shiller Indexes that have set new records.

 
At 8/28/2012 9:55 AM, Blogger Jon Murphy said...

There has been much hand-wringing about the fact that housing starts is well below the 1 million + level before the recession. But to focus on that and ignore the gains being made in housing is is disservice.

Sure, we have what I like to call a snail's tail of a recovery (that is, a long, flat period following a steep recession), but it is improvement nonetheless.

Do we have a long way to go in this recovery? Yes. But just as the tiny acorn turns into the mighty oak, or a newborn calf turns into a monster bull, so will the tentative first steps if this recovery turn into something generally sustainable (depending on what happens over the next six-eight quarters, there may be bumps on the road).

You begin moving a mountain by carrying away small stones. Well, these are the small stones we are carrying away.

Those of you who were/are/want a V-shaped recovery will be disappointed. But to then deny that no recovery is occurring simply because it is not as fast as you would like is incorrect.

This will not be a barn-burner of a recovery. We will not return to the pre-recession level of construction for a very long time. It will be, at times, a tenuous climb. But things are improving.


By the way, this is also good news for the overall economy. The US economy has not entered into a serious period of economic decline as long as housing construction was growing year-over-year.

 
At 8/28/2012 10:00 AM, Blogger Paul said...

Che,

"Only half of the previously foreclosed homes owned by Fannie Mae are either on the market or being prepared for sale. The remaining properties are currently locked away in some step of the foreclosure system."

I wish they would get on with putting the foreclosed homes up for sale, at least in Phoenix. Biggest problem here right now is lack of inventory.

 
At 8/28/2012 11:00 AM, Blogger bart said...

The Case Shiller NSA 20 is up .5% YoY.

In 2010 the YoY changes ranged from .43% to 4.64%, and were widely heralded as a bottom. They were followed by a brand new low in March 2012.
Similar bottom calls were widely heard for 2011 too, and were followed by a brand new low in March 2012.

The weekly Dataquick sales index continues to show a peaking formation, and the last three weeks show *zero* increase in the median home sales price. Of course this can be interpreted as exclusively a normal seasonal move, but it can also be interpreted as yet another false alarm.

The actual monthly payment on the average or median home continues to drop, which is not indicative of a real and longer term bottom having occured.



 
At 8/28/2012 11:12 AM, Blogger rjs said...

ummm...

it's for june, which is really a 3 month average back to april...

normally wouldnt nitpik, but IT'S one of those things...

 
At 8/28/2012 11:40 AM, Blogger juandos said...

Well this good news sure does clash with the updated FRED chart...

 
At 8/28/2012 12:51 PM, Blogger Unknown said...

^
Your FRED chart is only for NEW homes. The Case-Shiller index is for ALL homes.

 
At 8/28/2012 12:55 PM, Blogger Jon Murphy said...

Well this good news sure does clash with the updated FRED chart...

Not really. The FRED chart is showing a clear recovery in the single family homes market.

 
At 8/28/2012 1:01 PM, Blogger Methinks said...

But just as the tiny acorn turns into the mighty oak, or a newborn calf turns into a monster bull, so will the tentative first steps if this recovery turn into something generally sustainable (depending on what happens over the next six-eight quarters, there may be bumps on the road).

You begin moving a mountain by carrying away small stones. Well, these are the small stones we are carrying away.


Awwwwe, Jon Murphy! Nuthin' kills the drama like a caveat stuck smack in the middle of a moving speech! :)

 
At 8/28/2012 1:05 PM, Blogger Luther for Liberty said...

"Sustainable" recovery or Fed/Congress-inflated bubble like the last "sustainable recovery"? How could we differentiate?

 
At 8/28/2012 1:14 PM, Blogger Jon Murphy said...

Awwwwe, Jon Murphy! Nuthin' kills the drama like a caveat stuck smack in the middle of a moving speech! :)

I'm still getting the hang of this motivational speech thing!

I haven't learned not to mix reality with motivational speeches

 
At 8/28/2012 1:28 PM, Blogger juandos said...

"Your FRED chart is only for NEW homes. The Case-Shiller index is for ALL homes"...

Yes unknown I understand that but aren't 'new' homes the real indicator of how the market and those participating (buyers, builders, bankers, supplies and materials vendors, etc) in that market are doing financially?

 
At 8/28/2012 1:35 PM, Blogger Jon Murphy said...

Yes unknown I understand that but aren't 'new' homes the real indicator of how the market and those participating (buyers, builders, bankers, supplies and materials vendors, etc) in that market are doing financially?

New homes sold represent about 7-8% of homes sold. Single family homes (which your chart shows) is a little less than that.

 
At 8/29/2012 10:29 AM, Blogger morganovich said...

luther-

that was my question as well.

i can see how we get "recovery" from this, but sustainable seems a bit more questionable.

at some point, twist and zirp will end (preferably when beranke is fired as chair in jan 2014)

if rates were more normalized (say 5-6%) and the vast freddy and fannie purchases stopped along with the deeply subsidized low down payment FHA loans etc, i fear this rally would be anyhting but sustainable.

we seem to be painted into a corner here. how do we get out without wrecking the floor?

 
At 8/29/2012 10:32 AM, Blogger morganovich said...

"Yes unknown I understand that but aren't 'new' homes the real indicator of how the market and those participating (buyers, builders, bankers, supplies and materials vendors, etc) in that market are doing financially?"

mostly, no.

builders maybe, not not buyers, banks, homeowners etc.

most of the market is not new homes.

it's also more complex as when the price of existing homes is low, new homes simply are not built. if it costs $300 a foot to build and your area is selling existing at $200, why would you build?

CS is by far the best index to use as it compares homes to themselves and avoids the issues around normalization by location, square footage, amenities etc.

 
At 8/29/2012 3:07 PM, Blogger juandos said...

Thanks for the explanation morganovich, quite crystal clear for the most part...

One minor flaw and maybe its just a flaw as far as I'm concerned: "it's also more complex as when the price of existing homes is low, new homes simply are not built. if it costs $300 a foot to build and your area is selling existing at $200, why would you build?"...

Why would "I" build?

Because old homes like old cars suck as in money and time to keep them together...

Again strictly speaking from personal experience...

 

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