Data through September 2010, released by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index declined two percent in the third quarter of 2010, after having risen 4.7 percent in the second quarter. Nationally, home prices are 1.5 percent below their year-earlier levels. In September, 18 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were down; and only the two composites and five MSAs showed year-over-year gains. While housing prices are still above their spring 2009 lows, the end of the tax incentives and still active foreclosures appear to be weighing down the market.
The chart above depicts the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices. The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 1.5 percent decline in the third quarter of 2010 over the third quarter of 2009. In September, the 10-City and 20-City Composites recorded annual returns of +1.6 percent and +0.6 percent, respectively. These two indices are reported at a monthly frequency and September was the fourth consecutive month where the annual growth rates moderated from their prior month’s pace, confirming a clear deceleration in home price returns. The 10-City Composite posted a +1.6 percent annual growth rate in September, versus the +5.4 percent reported four months prior in May, and the 20-City Composite was up 0.6 percent, versus its +4.6 percent May print.
“Another weak report; weaker than last month. The national index is down 1.5 percent from the third quarter of last year and 15 of 20 cities are down over the last 12 months. Other than Tampa, Fla., there are no new lows this month but many analysts will argue that a double dip will be confirmed before Spring. While some of the bad numbers may reflect the end of the government’s tax incentive for first-time homebuyers, there are other problems weighing on the housing market.” said David M. Blitzer, chairman of the Index Committee at Standard & Poor's. “The national economy is certainly the number one issue for housing. Additionally, there is a large supply of houses on the market and further, hidden, supply due to delinquent mortgages, pending foreclosures or vacant homes. New construction is running at less than half the pace needed to meet normal demand, so a sustained recovery could be a ways off. Looking deeper into the data, in the monthly indices, 18 MSAs and both Composites were down in September over August. This is worse than August when 15 were down month-to-month. The only two which weren’t down in September were Las Vegas, which managed to stay a touch above the low set in July, and Washington DC. Overall, there are few, if any, good numbers in this month’s data.”
The chart above shows the index levels for the U.S. National Home Price Index, as well as its annual returns. As of the third quarter of 2010, average home prices across the United States are at similar levels to what they were in the middle of 2003. The 2010 third quarter values fell by two percent over the second quarter, with a corresponding annual rate of return of -1.5 percent. Since its 2009 Q1 trough, nationally home prices have only grown by +4.9 percent.
From their peak in June/July of 2006 through the trough in April 2009, the 10-City Composite is down 33.5 percent and the 20-City Composite is down 32.6 percent. Through September, they have recovered by +7.2 percent and +5.9 percent, respectively. The peak-to-date figures through September 2010 are -28.7 percent and -28.6 percent, respectively.
Both the 10-City and 20-City Composites saw slower annual growth. The 10-City Composite was up 1.6 percent in September, versus +2.5 percent in August, and the 20-City Composite was up 0.6 percent in September, versus August’s +1.7 percent.
Looking at the monthly statistics, both the 10-City and 20-City Composite were down in September over August, by -0.5 percent and -0.7 percent, respectively. Eighteen of the 20 metro areas declined in September compared to August—Las Vegas was up 0.1 percent and Washington, D.C. was up 0.3 percent. Washington has shown the most resilience against the recent contraction. It has been up for six consecutive months, beginning in April. Thirteen of the MSAs were down by one percent or more in September, with Cleveland posting the largest decline of three percent.
The table below summarizes the results for September 2010. The S&P/Case-Shiller Home Price Indices are revised for the 24 prior months, based on the receipt of additional source data.
Since its launch in early 2006, the S&P/Case-Shiller Home Price Indices have published, and the markets have followed and reported on, the non-seasonally adjusted data set used in the headline indices. For analytical purposes, Standard & Poor’s does publish a seasonally adjusted data set covered in the headline indices, as well as for the 17 of 20 markets with tiered price indices and the five condo markets that are tracked. A summary of the monthly changes using the seasonally adjusted (SA) and non-seasonally adjusted (NSA) data can be found in the table below. A summary of the monthly changes using the seasonally adjusted (SA) and non-seasonally adjusted (NSA) data can be found in the table below.
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