Here’s the title of the latest press release from Standard and Poor’s regarding today’s release of almost-hopeful Case-Shiller home price data: April Seasonal Boost in Home Prices According to the S&P/Case-Shiller Home Price Indices.
Calculated Risk puts it a little more bluntly: Case-Shiller: Home prices increase in April.
Understanding seasonal changes is the key to understanding today’s data.
During the federal government’s attempts to prop up home prices via tax credits and other methods, Case-Shiller began focusing on data that was not adjusted for seasonality. One wonders when the index will switch their focus back to the seasonal adjustments, which give a better sense of underlying trends. (The Georgia Department of Labor is about to make me crazy, btw, by bragging about weak spring job growth that, if seasonally adjusted, would likely indicate job losses.) We would typically expect home prices to increase in the spring as demand rises. It’s notable, though, that Case-Shiller’s April data is really a 3-month average of February, March, and April. The seasonally adjusted numbers, therefore, look slightly worse, but not much worse. As Calculated Risk notes, even with the seasonal adjustment, prices rose very slightly in a number of cities: “Prices increased (SA) in 9 of the 20 Case-Shiller cities in April seasonally adjusted.”
Here’s Calculated Risk’s graph of seasonally adjusted Case-Shiller values:
Here’s CR’s graph for year-over-year change in %, which shows prices down about 4% from a year ago:
Keep in mind that price declines have not been consistent across the country. Las Vegas is still down more than 50% from the peak of the boom while Dallas is down less than 10%. Also keep in mind that the April increases are tiny compared to the large changes of recent years.
Reasons for the recent improvement: Distressed sales make up a smaller % of sales as demand picks up. Those who can qualify for mortgages have steady jobs and access to a significant downpayment. The market continues to be buoyed by government incentives, like the extension of tax credits to deployed soldiers. The rental market in many areas has gotten tighter and more expensive, which puts upward pressure on purchase prices. The large number of vacant homes in the foreclosure process has artificially reduced inventory. All of these factors could help boost prices, at least for the next couple of months.
But what happens in the fall when the seasonal pressures change?
I’m still expecting prices to work their way down about 10% or so over the next year. And in some markets with extremely large inventories, we could see prices fall for many months or even a few years more. Other analysts are more optimistic and think we’ll more or less bounce along the current bottom in prices for the rest of the year. We’ll see.
For numbers lovers, here’s the data for 20 cities from today’s S&P press release:
