S&P/Case-Shiller Home Price Indices Record Strong Gains

Home prices showed strong gains March. S&P Dow Jones Indices released its S&P/Case-Shiller Home Price Indices Tuesday morning, and the report showed that all three composites posted double-digit annual increases. Measured year over year, the gains were impressive, with the 10-City and 20-City Composites increasing by 10.3 percent and 10.9 percent. These were the largest gains since April 2006, near the peak of the housing bubble. Meanwhile, the national composite rose a similar 10.2 percent in the last four quarters. All 20 cities posted positive year-over-year growth. In the first quarter of 2013, the national composite rose by 1.2 percent from the fourth quarter. On a monthly basis, the 10- and 20-City Composites both posted increases of 1.4 percent from February. David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, said, “Home prices continued to climb. Home prices in all 20 cities posted annual gains for the third month in a row. Twelve of the 20 saw prices rise at double-digit annual growth. The National Index and the 10- and 20-City Composites posted their highest annual returns since 2006. “Phoenix again had the largest annual increase at 22.5 percent followed by San Francisco with 22.2 percent and Las Vegas with 20.6 percent. Miami and Tampa were softer with annual gains of 10.7 percent and 11.8 percent. The weakest annual price gains were seen in New York (+2.6 percent), Cleveland (+4.8 percent) and Boston (+6.7 percent); even these numbers are quite substantial. “Other housing market data reported in recent weeks confirm these strong trends: housing starts and permits, sales of new home and existing homes continue to trend higher. At the same time, the larger than usual share of multi-family housing, a large number of homes still in some stage of foreclosure and buying-to-rent by investors suggest that the housing recovery is not complete.” Still, the increase in housing prices hasn't erased the large losses suffered in the housing bust. In fact, as of March 2013, average home prices across the United States are now at their late 2003 levels for both the 10-City and 20-City Composites. And measured from their June/July 2006 peaks, the peak-to-current decline for both Composites is approximately 28-29 percent. However, from their lows in March 2012, prices have recovered by 10.3 percent and 10.9 percent for the 10- and 20-City Composites, respectively. This should help bolster consumer confidence, and increase home equity levels. It may return some underwater homeowners to positive home equity, and could allow them to move, perhaps to take another job in another part of the country. While it is not likely that homeowners will extract equity from their homes to spend as they had done during the housing bubble, the increased confidence from greater wealth may prompt some consumers to spend more – if their incomes permit. Charlotte, Los Angeles, Portland, Seattle and Tampa were the five MSAs to record their largest month-over-month gains in over seven years, but 15 cities showed monthly gains increased. Denver, Charlotte, Seattle and Washington entered positive territory; Seattle and Charlotte were the most notable with returns of +3.0 percent and +2.4 percent. San Francisco posted the highest month-over-month return of 3.9 percent. All 20 cities showed increases on an annual basis for at least three consecutive months. Atlanta, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, Phoenix, Portland, San Diego, San Francisco, Seattle and Tampa all posted double-digit annual returns. Las Vegas, Phoenix and San Francisco were the three MSAs to increase over 20 percent in March 2013 over March 2012.