Case-Shiller House Price Indexes for May – Encouraging Signals


Tuesday’s release of the Case-Shiller house price indexes includes data for May for the monthly 20 and 10 city composite indexes and the component city indexes (the national index is released quarterly). Both composites increased in May from April by 2.2 percent and all 20 component indexes increased for the month, ranging from 0.4 percent in Detroit to 4.5 percent in Chicago (on a non-seasonally adjusted basis). The 20 and 10 city composites were down from year ago levels, by 0.7 percent and 1.0 percent, respectively. Twelve of the component city indexes were above last May’s levels while eight were below.

It’s common in analyses of these indexes to report monthly changes and the change from the same month one year ago. But it is more instructive to examine the movements in the indexes from a broader perspective, rather than these two simple statistics. For example, given that this release includes data averaged over March, April and May, the traditional period when this very seasonally sector begins to pick up, and the data is not seasonally adjusted, it’s not surprising to find all the indexes, components and composites increasing. The monthly improvement could be reflecting typical seasonal variation rather than underlying trends. Another consideration is that comparisons to a year ago are dependent on the consistency of the seasonal pattern.

Looking at the indexes from a broader perspective it’s encouraging to note that the indexes for Los Angeles, San Diego and Cleveland, within strong seasonal patterns, despite being lower than in May of last year, have shown stronger growth from their preceding winter troughs in the first five months of this year, just from a lower base. House prices in Los Angeles have risen 3.9 percent so far this year compared to 0.8 percent last year.

Similarly, a better signal of strengthening house prices relative to last year in San Francisco, Miami and Tampa is not that the indexes are modestly higher but that the growth so far this year is considerably stronger.

House prices in Denver, Washington DC, and Dallas are 3 percent to 4 percent higher than in May of last year, while in Boston they are down slightly, but it’s more important to recognize that these markets are entering a fourth year of price stability. The Charlotte, Minneapolis and Cleveland markets are also showing signs of leveling off, seasonality notwithstanding.

In contrast, the spring strength in the Atlanta, Chicago, and New York markets may not be the last word. Monthly house price growth in Chicago was the highest among the 20 cities.

Whether house prices in Detroit, Portland and Seattle are really turning around remains to be seen given their recent histories, but the absence of seasonal patterns and continuing improvement in Phoenix as well as the recent improvement in Las Vegas, two of the hardest hit housing markets, are definitely encouraging signs. The turnaround in house prices in Las Vegas is positive news regardless of the level last year (down 3.2 percent).

So the lesson is that when trying to understand trends in house prices using the Case-Shiller indexes, the 20 market scorecard of monthly and year ago changes is less informative than a good hard look at the data and careful interpretation of the trends underneath the seasonal patterns.

For full histories of the 20 markets included in the Case-Shiller composite, click here cs.


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