Modest growth in house prices despite weak housing demand


House prices continued to rise in July, despite the recent weak housing demand following the expiration of the homebuyer tax credit. The Standard and Poor’s release of the Case-Shiller Home Price Index (HPI) indicates that house prices grew moderately in July, with the Case-Shiller 10-city composite index (the CS10) up 0.8% to 162.3 (NSA) and the 20-city composite (the CS20) up 0.6% to 147.55 (NSA). On a seasonally adjusted basis house prices were essentially flat, with a very slight 0.03% rise in the CS10 to 160.9 and a 0.12% decrease in the CS20 to 147.55.  As noted in the past, when observing the Case-Shiller HPI attention should be focused on the not-seasonally adjusted numbers.

The Case-Shiller HPIs are three month moving averages of house prices, with the July HPIs including sales from May, June and July. The July readings are the first to include a month outside the homebuyer tax credit window – with most contracts signed before April 30, concluded by the end of June. Therefore, a cooling in the HPIs was expected.  The modest rise in the Case-Shiller HPIs was welcome given the negative response of other housing market indicators in their first month after the expiration of the home buyer tax credit.

Prices rose in 13 of the 20 cities covered by the index on a not seasonally adjusted basis (but were up in only 4 cities on a seasonally adjusted basis). On a not seasonally adjusted basis, the strongest growth was observed in Detroit MI (1.61%), New York NY (1.33%) and Washington DC (1.15%). The weakest markets continue to be those that experienced the greatest surge in prices during the boom, with the largest declines in July in Las Vegas (-0.85%) and Phoenix (-0.60%).

Since reaching the trough in the Spring of 2009, house prices have shown moderate growth. On a year-over-year basis the CS10 index has grown 4.05% (NSA) and the CS20 has risen 3.18% (NSA). In the past year the HPI has risen in 10 of the 20 cities covered by the Case-Shiller index. The strongest growth in year-over-year prices were in observed in California MSAs (LA 8%, San Francisco 11% and San Diego 9%) and Minneapolis MN (6%). The weakest markets include Las Vegas, NV (-5%) and Tampa, FL (-3%).

The influence of the homebuyer tax credit on home sales is fading, so it is encouraging that house prices continued to show moderate growth in July. Despite the volatility that we have seen in other key housing market indicators, we expect house prices to remain stable in the near term.

CS HPI 09_10

CS HPI by metro 09_10

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