Case Shiller Home Prices Index Continues Slow Increases

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Case Shiller CoreLogic indices ROSE in July but by the slowest pace in almost a year;
  • The 10-city index EDGED UP 0.03 percent and the 20-city index ROSE 0.13 percent in July compared with increases of 0.26 percent and 0.38 percent respectively in June;
  • Year-year the 10-city index was UP 1.6 percent and the 20-city index ROSE 2.0 percent in July after annual increases of 1.9 percent and 2.2 percent in June;
  • Year-year growth in both indices was the weakest since 2012
  • The national index IMPROVED 0.39 percent in July compared with 0.59 percent in June and was UP 3.2 percent year-year, matching June;
  • The price index FELL in three cities in July, after falling in only one in June
  • Year-year growth for the 10-, 20-city and national indices also ROSE but was the weakest year-year growth in seven years
  • Year-year the price index ROSE in July in all but one of the 20 cities surveyed (Seattle), but the year-year increase was slower in 10 of the 20 cities than it had been in June.

Trends:

  • The price index rose in all four census regions led by a 0.6 percent increase in the Midwest;
  • The July increases were slower than June in 13 cities;
  • The price index rose for the 19th straight month in Miami and 11th straight month in Dallas.

Data Source: S&P Case Shiller/Core Logic

Image result for home prices

Home values continued to creep up in July but at a snail’s pace according to the Case Shiller Core-Logic Home Price Index and the year-year growth in values continued to slow.

The month-month price gains in July were weaker than June, just as they had been in June compared with May, May compared with April and April compared with March. The pattern matched the strong of declining growth at the end of 2006 presaging the housing tailspin of 2007 and 2008. Home values declined, per the Case Shiller index for 37 straight months beginning in January 2007.

That’s not to say we’re headed for an equally prolonged housing crash, but Robert Shiller, one of the progenitors of the eponymous home price index, remains fearful.

“It would not surprise me at all if in the next year or two we saw modest declines in home prices and if things play out right, there could be bigger declines,” Shiller said recently.

In a new book, Narrative Economic, Shiller cautioned economists should focus less on the data in economic reports and more on the behavior leading to the data. As an example, he noted a consumer cut in spending exacerbates an economic downturn, making the data look even worse.

According to Shiller, studying the behavior of consumers can improve our ability to predict, prepare for, and lessen the damage of financial crises, recessions, depressions, and other major economic events.

Ideas, he argues, can go viral and move markets―whether it’s the belief that tech stocks can only go up, that housing prices never fall, or that some firms are too big to fail. That said, he doesn’t explain how consumers will find the wherewithal to continue spending as the economy around them falters.

All this provides background to the most recent Case Shiller CoreLogic Home Price Index which, whether due to data or anecdote, continues to show weakness in the housing sector, weakness that can, in part, be traced back to the tax law changes which went into effect at the end of 2017, reducing the tax benefits of homeownership. Indeed, since in the 20 months since December 2017 when the tax changes were signed into law, the Case Shiller 20-city home price index has risen 6.6 percent compared with a 9.3 percent increase in the 20 months before the tax law took effect,

According to the July report, prices rose 3.2 percent year-year in July, The National Association of Realtors reported that for July the median price of an existing single-family home was up 4.1 percent over the previous July.

According to the Case Shiller data, prices rose fastest in Cleveland in July, up 1.1 percent, the only city to show a month-month increase of 1 percent or more. Home prices fell 0.3 percent in Los Angles and 0.1 percent in each New York and Washington DC. Year-year prices fell 0.6 percent in Seattle but increased fastest in Phoenix (5.8 percent).

Hear Mark Lieberman this Friday on P.O.T.U.S. radio’s Morning Briefing, Sirius-XM 124, at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

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