Left: Four S&P/Case-Shiller Home Price Indices — Percent Change From a Year Ago
Right: Two S&P/Case-Shiller Home Price Indices — Index History by Month
The Mortgage Bankers Association released data this week suggesting that the national tide of foreclosures may be turning. On the same day, The New York Times reported other data to the effect that foreclosures already in the pipeline will lead to further increases before we finally see any real improvment.
Some experts believe that the backlog of foreclosures will continue to depress housing values for several more years. Others argue that prices have already stabilized. The closely watched S&P/Case-Shiller Home Price Index, appears to support the latter conclusion. It’s latest report shows prices improving, albeit slowly and unevenly, across the country.
The top chart shows the annual percent change in the composite S&P/Case-Shiller Home Price Indices, and in the index for Metro Boston. (The numbers are not seasonally adjusted.) As you can see, Metro Boston has finally broken through into positive territory. That means prices are growing again, on a year-to-year basis, for the first time since May 2006. Of course, Metro Boston is a large area and market conditions will vary from town to town. Five other metro areas now share the distinction of appreciating home prices.
The bottom chart compares the history, by month of a key S&P/Case-Shiller Home Price Index, and of that for Metro Boston. (The numbers are not adjusted for inflation. 100 equals Jan. 2000. Metro Boston’s high was May 2006; its low was March 2009; the latest is at the level of July 2003, for a 14% net decline from the peak.)
S&P/Case-Shiller Home Price Indices are based on repeat sales of single-family homes. They are backward-looking, released with a two-month lag. Each monthly report comprises a three-month rolling average. So, for example, the latest report — that for December 2009 — comprises data for October, November and December.
Some analysts worry about drawing any conclusions from such “old” data. Others point to the massive government intervention in the housing market, that makes predictions even more difficult than usual — some say, impossible. Nevertheless, when the indices are graphed, the recent home price trends become readily apparent.
In some metro markets, the rate of price improvement over the summer of 2009 has not been sustained, causing concern among analysts. In the present, fragile stage of the recovery, any negative numbers feed speculation about a second “dip” in the recession. Some fall-off in home prices was to be expected, however, after expiration of the first homebuyer tax credit. We’ll likely see the same after expiration of the second.
To be continued…