Case-Shiller Price Index

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the Case-Shiller home price index.

• Home prices are rocketing up in Phoenix.  That is according to the Case-Shiller price measurement, which puts prices rising in the desert by 9 percent from one year ago to April.  Based on the strength of month-to-month gains, Phoenix has been notching up 30 percent annualized gains for 4 straight months.
• Case-Shiller prices for the 20-metro market it covers are up by 0.7 percent for the second straight month.  But because of price declines in the last year, home prices are still down by 1.9 percent from one year ago.  The decline figure has been quickly diminishing because of the upturn in recent months.
• Aside from Phoenix, there are several other markets with positive price gains from one year ago, including Dallas, Denver, Minneapolis, and Washington, D.C.  Markets like Houston and San Jose are most likely in the clearly positive territory though Case-Shiller does not cover these markets.
• Note from the graph that price declines have been cataclysmic from 2006 to 2009.  Declines since then, however, have been very modest.  That is why homebuyers who purchased from 2009 on have some of the lowest mortgage default rates of any vintage group and therefore are some of the most successful, though they have little to show for it in terms of housing equity gains.  If home prices continue to trend upward then housing equity will steadily accumulate over time.
• Case-Shiller is a lagging indicator.  The latest data is as of April, March, and February combined.  The transacted prices would have been negotiated back in November and December of last year.  As we’re already near July, we are just now getting good information on prices of what happened late last year.  Based on recent information on tightening inventory conditions, fewer distressed properties on the market, fewer seriously delinquent mortgages outstanding, and more importantly a rising housing demand, the price conditions will no doubt show even better improvement as we proceed through the year.  In other words, Phoenix could easily show 20 percent or even higher gains by the year end based on recent trends of acute shortage of inventory and multiple bidding in the area.