Home prices lose momentum

by lgrant@solagroup.com

Data through December 2013, released by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, showed that National home prices closed the year of 2013 up 11.3 percent. This represents a slight improvement over last quarter's annual rate of 11.2 percent. In the fourth quarter of 2013, the National Index declined 0.3 percent.

In December, the 10-City Composite remained relatively unchanged while the 20-City Composite showed its second consecutive monthly decline of 0.1 percent. Year-over-year, the 10-City and 20-City Composites posted gains of 13.6 and 13.4 percent, approximately 30 basis points lower than their November rates. Chicago showed its highest year-over-year return since December 1988. Dallas set a new peak and posted its largest annual gain since its inception in 2000. Denver declined 0.1% and is now 0.7 percent below its all-time index level high set in September 2013.

The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded an 11.3 percent gain in the year of 2013. The 10- and 20-City Composites posted increases of 13.6 and 13.4 percent for 2013.

"The S&P/Case-Shiller Home Price Index ended its best year since 2005," says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. "However, gains are slowing from month-to-month and the strongest part of the recovery in home values may be over. Year-over-year values for the two monthly Composites weakened and the quarterly National Index barely improved. The seasonally adjusted data also exhibit some softness and loss of momentum.

After 26 months of consecutive gains, Phoenix posted -0.3 percent for the month of December, its largest decline since March 2011. Phoenix once led the recovery from the bottom in 2012, but Las Vegas, Los Angeles and San Francisco were the top three performing cities of 2013 with gains of more than 20 percent. The Sun Belt, with the exception of Dallas, Miami and Tampa, saw lower annual rates in December when compared to their November numbers. The six cities with the highest year-over-year figures saw their rates decline (Las Vegas, San Francisco, Los Angeles, Atlanta, San Diego and Detroit) and most cities ranked at the bottom improved (Denver, Washington and New York) – Charlotte and Cleveland were the two exceptions.

"Recent economic reports suggest a bleaker picture for housing. Existing home sales fell 5.1 percent in January from December to the slowest pace in over a year. Permits for new residential construction and housing starts were both down and below expectations. Some of the weakness reflects the cold weather in much of the country. However, higher home prices and mortgage rates are taking a toll on affordability. Mortgage default rates, as shown by the S&P/Experian Consumer Credit Default Index, are back to their pre-crisis levels but bank lending standards remain strict."

As of the fourth quarter of 2013, average home prices across the United States are back to their levels posted in the spring of 2004. At the end of the fourth quarter of 2013, the National Index was down 0.3 percent over the third quarter of 2013 and 11.3 percent above the fourth quarter of 2012.

As of December 2013, average home prices across the United States are back to their mid-2004 levels. Measured from their June/July 2006 peaks, the peak-to-current decline for both Composites is approximately 20 percent. The recovery from the March 2012 lows is 23-24 percent for the 10-City and 20-City Composites.

Only six cities – Dallas, Las Vegas, Miami, San Francisco, Tampa and Washington – posted gains for the month of December. Miami held its leadership position with an increase of 0.9 percent followed by Las Vegas at +0.4 percent. Atlanta, Detroit and Los Angeles remained relatively unchanged – Detroit remains the only city below its January 2000 level. Although Chicago declined 0.5%, the city improved considerably from its decline of 1.2 percent last month. Cleveland posted the largest decline – it also showed the most deceleration with a gain of 0.2 percent in November to a 1.2 percent decline in December.

All 20 cities showed positive year-over-year increases. Las Vegas, Los Angeles and San Francisco posted gains of over 20 percent – all three cities showed lower annual rates in December than in November. Eleven cities saw their year-over-year returns slow. The average deceleration was much higher than the average improvement – Las Vegas showed an annual rate that was lower by 1.8 percentage points and Portland showed an improvement of approximately 60 basis points.

More than 26 years of history for these data series are available. Additional content on the housing market may also be found on S&P Dow Jones Indices' housing blog.

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