Sustained Home Price Gains Show Strength of Recovery

Case-Shiller indices post 6th consecutive month-to-month gain

By Inman News, Tuesday, November 27, 2012

Consistent home price gains demonstrate that the housing recovery is on solid ground, the publishers of a leading home price index and other industry experts say.

The S&P/Case-Shiller national home price index — which tracks single-family home prices in all nine U.S. Census divisions on a quarterly basis — was up 3.6 percent from a year ago during the third quarter, and 2.2 percent from the second quarter.

The 10- and 20-city S&P/Case-Shiller home price indices posted month-to-month gains for the sixth month in a row, both rising 0.3 percent in September. The composites also posted annual gains for the fourth month in a row, rising 2.1 percent and 3.0 percent in September, respectively.

“We are entering the seasonally weak part of the year,” said David Blitzer, chairman of the index committee at the S&P Dow Jones Indices, in a statement. “Despite the seasons, housing continues to improve.”

“With six months of consistently rising home prices, it is safe to say that we are now in the midst of a recovery in the housing market,” Biltzer said.

Source: S&P Dow Jones Indices and Fiserv

Eighteen of the 20 large U.S. metros tracked by the 20-city composite index saw annual price gains in September, with Chicago and New York City the only metros recording dips.

A home price index maintained by the Federal Housing Finance Agency showed home prices up 4.0 percent from a year ago during the third quarter, and a 0.2 percent bump in September from August.

That index — which tracks homes with mortgages backed by Fannie Mae and Freddie Mac — showed home prices returning to June 2004 levels, but still down double-digit-percent points from an April 2007 high. It also shows the longest steady rise in home prices since the April 2007 high.

Source: Federal Housing Finance Agency

The S&P/Case-Shiller 20-city composite index shows home prices approximately 30 percent below a June/July 2006 peak in September, but it’s climbing; August’s index level was 35 percent away from that peak.

S&P/Case-Shiller 20-city composite index

Month in 2012 Year-over-year change
January -3.9%
February -3.5%
March -2.5%
April -1.7%
May -0.5%
June 0.6%
July 1.1%
August 1.9%
September 3.0%

Source: Calculated Risk

Writing on his blog, Calculated Risk, Bill McBride said the four consecutive months of year-over-year home price increases in September was the longest since 2010, when housing markets got a boost from the federal housing tax credit. Excluding the influence of the tax credit on the increases, September’s string of growth is the longest since 2006, he noted.

Source: Calculated Risk

Five factors have influenced rising home prices, reports the Wall Street Journal:

  • Housing affordability is high. Price-to-rent and price-to-income measures favor home ownership in many markets.
  • Household formation is increasing.
  • Rents are going up.
  • The share of distressed sales are decreasing.
  • Inventories of for-sale homes are at record lows.

Metros in the 20-city composite posting the highest annual increases were Phoenix (20.4 percent), Minneapolis (8.8 percent), and Detroit (7.6 percent).

Metro area September 2012 index level Change from August Change from a year ago
Atlanta 96.06 0.3% 0.1%
Boston 157.26 -0.6% 1.9%
Charlotte 116.28 -0.3% 3.5%
Chicago 116.69 -0.6% -1.5%
Cleveland 102.10 -0.9% 1.4%
Dallas 121.57 0.2% 4.4%
Denver 134.01 0.4% 6.7%
Detroit 79.82 0.7% 7.6%
Las Vegas 97.38 1.4% 3.8%
Los Angeles 174.80 1.0% 4.0%
Miami 150.24 0.1% 7.4%
Minneapolis 126.02 1.1% 20.4%
New York City 166.10 -0.1% -2.3%
Phoenix 120.65 1.1% 20.4%
Portland 141.10 0.2% 3.7%
San Diego 160.09 0.3% 4.8%
San Francisco 143.15 0.5% 7.5%
Seattle 142.09 0.3% 4.8%
Tampa 134.90 0.0% 5.9%
Washington, D.C. 192.36 0.0% 3.2%
Composite-10 158.93 0.3% 2.1%
Composite-20 146.22 0.3% 3.0%

Sources: S&P Dow Jones Indices and Fiserv.