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S&P/Case-Shiller Home Price Indices increase 0.1% in January
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S&P Dow Jones Indices today released the latest results for the S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices. Data released today for January 2015 show that home prices continued their rise across the country over the last 12 months. However, monthly data reveal slowing increases and seasonal weakness.
Year-over-Year
Both the 10-City and 20-City Composites saw year-over-year increases in January compared to December. The 10-City Composite gained 4.4% year-over-year, up from 4.3% in December. The 20-City Composite gained 4.6% year-over-year, compared to a 4.4% increase in December. The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 4.5% annual gain in January 2015 versus a 4.6% increase in December 2014.
Denver and Miami reported the highest year-over-year gains, as prices increased by 8.4% and 8.3%, respectively, over the last 12 months. Fourteen cities reported higher price increases in the year ended January 2015 over the year ended December 2014. Chicago led the way with a reported increase of 2.5%, up 11 basis points from December. Six cities reported declines, with San Francisco leading the declining annual returns with a reported rate of 7.9%, down from 9.4% annually.
Month-over-Month
The National index declined for the fifth consecutive month in January, reporting a -0.1% change for the month. Both the 10- and 20-City Composites reported virtually flat month-over-month changes. Of the nine cities that reported increases, Charlotte, Miami, and San Diego led all cities in January with increases of 0.7%. San Francisco reported the largest decrease of all 20 cities, with a month-over-month decrease of -0.9%. Seattle and Washington D.C. reported decreases of -0.5%. Unusually cold and wet weather may have weakened activity in some cities.
Analysis
The combination of low interest rates and strong consumer confidence based on solid job growth, cheap oil and low inflation continue to support further increases in home prices. Regional patterns in recent months continue: strength in the west and southwest paced by Denver and Dallas with results ahead of the national index in the California cities, the Pacific Northwest and Las Vegas. The northeast and Midwest are mostly weaker than the national index.
Despite price gains, the housing market faces some difficulties. Home prices are rising roughly twice as fast as wages, putting pressure on potential homebuyers and heightening the risk that any uptick in interest rates could be a major setback. Moreover, the new home sector is weak; residential construction is still below its pre-crisis peak. Any time before 2008 that housing starts were as low as the current rate of one million, the economy was in a recession.
The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 4.5% annual gain in January 2015. The 10- and 20-City Composites reported year-over-year increases of 4.4% and 4.6%.
As of January 2015, average home prices for the MSAs within the 10-City and 20-City Composites are back to their autumn 2004 levels. Measured from their June/July 2006 peaks, the peak-to-current decline for both Composites is approximately 16-17%. Since the March 2012 lows, the 10-City and 20-City Composites have recovered 28.2% and 29.0%.
Posted: March 31, 2015 Tuesday 09:00 AM