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U.S. Home Prices Continue To Soar — Will Homebuilders Benefit?
From Jill Mislinski: With Tuesday’s release of the December S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.9% month over month.
The seasonally adjusted year-over-year change has hovered between 4.2% and 5.8% for the last twenty-four months. Today’s S&P/Case-Shiller National Home Price Index (Nominal) reached another new high. The Real S&P/C-S HPI is at its post-recession high.
The adjacent column chart illustrates the month-over-month change in the seasonally adjusted 20-city index, which tends to be the most closely watched of the Case-Shiller series. It was up 0.9% from the previous month. The nonseasonally adjusted index was up 5.6% year-over-year.
Investing.com had forecast a 0.7% MoM seasonally adjusted increase and 5.3% YoY nonseasonally adjusted for the 20-city series.
Here is an excerpt of the analysis from today’s Standard & Poor’s press release.
“Home prices continue to advance, with the national average rising faster than at any time in the last two-and-a-half years,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “With all 20 cities seeing prices rise over the last year, questions about whether this is a normal housing market or if prices could be heading for a fall are natural. In comparing current home price movements to history, it is necessary to adjust for inflation. Consumer prices are higher today than 20 or 30 years ago, while the inflation rate is lower. Looking at real or inflationadjusted home prices based on the S&P CoreLogic Case-Shiller National Index and the Consumer Price Index, the annual increase in home prices is currently 3.8%. Since 1975, the average pace is 1.3%; about two-thirds of the time, the rate is between -4% and +7%. Home prices are rising, but the speed is not alarming.” [Link to source]
The chart below is an overlay of the Case-Shiller 10- and 20-City Composite Indexes along with the national index since 1987, the first year that the 10-City Composite was tracked. Note that the 20-City, which is probably the most closely watched of the three, dates from 2000. We’ve used the seasonally adjusted data for this illustration.
For an understanding of the home price data over longer time frames, we think a real, inflation-adjusted visualization of the data is an absolute necessity. Here is the same chart as the one above adjusted for inflation using a subcomponent of Bureau of Labor Statistics’ Consumer Price Index, the owners’ equivalent rent of residences, as the deflator. Among other things, the real version gives a better sense of the dynamics of the real estate bubble that preceded the last recession.
The next chart shows the year-over-year Case-Shiller series, again using the seasonally adjusted data.
Here is the same year-over-year overlay adjusted for inflation with the Consumer Price Index owners’ equivalent rent of residences.
For a long-term perspective on home prices, here is a look at the seasonally and inflation-adjusted Case-Shiller price index from 1953, the first year that monthly data is available. Because the CPI owners’ equivalent rent of residences didn’t start until 1983, we’ve used the broader seasonally adjusted Consumer Price Index.
To get an even better idea of the trend in housing prices over long time periods, we compare the change in the seasonally-adjusted Case-Shiller Home Price Index and the Consumer Price Index since 1953.
For additional perspectives on residential real estate, here is the complete list of our monthly updates:
- S&P/Case-Shiller Home Price Index
- FHFA House Price Index
- NAHB Housing Market Index
- New Home Sales
- Existing Home Sales
- New Residential Housing Starts
- New Residential Building Permits
- Secular Trends in Permits and Starts
- Pending Home Sales
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