REAL ESTATE NEWS...Home Price Growth Slows In February, S&P/Case-Shiller Says

The growth in sales prices for single-family homes continued to slow in February, S&P/Case-Shiller indicated Tuesday.

On a national basis, prices appreciated 4.2% (seasonally adjusted) year-over-year in February, compared to 4.4% (seasonally adjusted) year-over-year in January, according to the S&P/Case-Shiller National Home Price Index, which tracks all nine Census divisions. While price growth across the nation slowed overall, collectively the major American cities saw their prices accelerate. An index tracking single-family home prices in 20 major U.S. cities gained an annual 4.8% in February, up from a 4.3% increase in January; a separate index tracking 10 cities gained 5% in February, compared to 4.5% in January.

“Home prices continue to rise and outpace both inflation and wage gains,” said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices.

Of course, price growth varied significantly by city. Denver and San Francisco recorded the highest year-over-year price gains, at 10% and 9.8% respectively. Miami saw an annual price increase of 9.2%, followed by Dallas (8.6%), Portland, Ore. (7.1%), and Seattle (7.1%). Next in line were Tampa (6.9%), Las Vegas and Los Angeles (both 5.8%). Washinton, D.C. (1.4%), Cleveland (2.3%), and New York (2.5%) saw the smallest annual price gains.

Seventeen cities welcomed greater year-over-year gains in February than in January. Only San Diego, Las Vegas, and Portland, Ore., recorded slower annual increases in February than in January.

In the S&P/Case-Shiller National Index has witnessed 34 straight months of year-over-year gains, while all 20 cities have shown year-over-year gains every month since the end of 2012, Blitzer noted.

 

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“While prices are certainly rebounding, only two cities–Denver and Dallas–have surpassed their housing boom peaks,” Blitzer said. “Nationally, prices are almost 10% below the high set in July 2006. Las Vegas fell 61.7% peak to trough and has the farthest to go to set a new high; it is 41.5% below its high. If a complete recovery means new highs all around, we’re not there yet.”

Late 2013 and early 2014 witnessed several months of of double-digit annual price increases, but price appreciation has now been generally slowing for more than a year. Economists forecast further slowdowns throughout 2015.

The chart above depicts the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices. The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 4.2% annual gain in February 2015. The 10- and 20-City Composites reported year-over-year increases of 4.8% and 5.0%.

National Index, year-over-year change in prices (seasonally adjusted):
June 2013: 9.2%
July 2013: 9.7%
August 2013: 10.2%
September 2013: 10.6%
October 2013: 10.9%
November 2013: 10.8%
December 2013: 10.8%
January 2014: 10.5%
February 2014: 10.2%
March 2014: 9.0%
April 2014: 7.9%
May 2014: 7.1%
June 2014: 6.3%
July 2014: 5.6%
August 2014: 5.1%
September 2014: 4.8%
October 2014: 4.7%
November 2014: 4.7%
December 2014: 4.6%
January 2015: 4.5%
February 2015: 4.2%

In February the National Index increased by 0.1% on a month-over-month basis. Both the 10 and 20-City Composites bumped up by 0.5%, their largest increases since July 2014. Again, price growth varied by city. Sixteen cities saw price appreciation rise month-over-month in February compared to January (on a non-seasonally adjusted basis), led by San Francisco (2%) and Denver (1.4%). Cleveland reported the biggest monthly drop at 1%; Las Vegas and Boston saw declines of 0.3% and 0.2%, respectively.

“A better sense of where home prices are can be seen by starting in January 2000, before the housing boom accelerated, and looking at real or inflation adjusted numbers. Based on the S&P/Case-Shiller National Home Price Index, prices rose 66.8% before adjusting for inflation from January 2000 to February 2015; adjusted for inflation, this is 27.9% or a 1.7% annual rate,” Blitzer said. “The highest price gain over the last 15 years was in Los Angeles with a 4.3% real annual rate; the lowest was Detroit with a -3.6% real annual rate. While nationally, prices are recovering, new construction of single family homes remains very weak despite low vacancy rates among both renters and owner-occupied homes.”

Groundbreakings on new homes rose just 2% in March compared to February, and were 2.5% below the level in March 2014. Sales of previously-owned homes hit its highest level in 18 months in March as inventory eased. (Both reports are a month ahead of the S&P/Case-Shiller report, which lags by two months.)

“Home value growth seems to have stabilized, a positive development overall, but also one that sheds light on an unchanging and ugly remnant of the housing crisis: Negative equity,” said Stan Humphries, Zillow Z -0.21%’s chief economist, in reaction to Tuesday’s numbers. “As home value appreciation flattened, the negative equity rate also stabilized over the second half of last year. Roughly 17% of homeowners with a mortgage were underwater as of the end of last year, owing more on their home than it is worth, unchanged from the prior quarter. Negative equity is likely to remain a persistent feature of the housing market for years, particularly among the kinds of less expensive, entry-level homes so attractive to younger buyers.”

As of February 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 the 10- and 20-city measures is approximately 15-17%. Since the March 2012 lows, the 10-City and 20-City Composites have recovered 28.8% and 29.5%.

S&P/Case-Shiller is now releasing its National Home Price Index each month. Previously, it was published quarterly, while the 10-City and 20-City Composites were published monthly. The “July” numbers listed for the National Index above reflect a roll-up of data for the three-month average of May, June and July prices.