Case-Shiller Monthly House Price Indexes – It’s Time To Talk About Seasonal Adjustment


The S&P/Case-Shiller (CS) monthly home price indexes covering the 10 city and 20 city composites, and the component cities were released today for October. Both the 10 and 20 city composites posted small declines for October over September (both -0.1% on a non-seasonally adjusted basis – S&P’s headline measure), after decelerating from peak growth rates in June. The monthly growth rates for the 10 and 20 city composites in June were 2.1% and 2.3%, respectively. The number of component cities with positive monthly price growth dropped from all 20 cities to 8 between June and October.

No alarm bells, please. This is not a reversal of recent improvements or renewed deterioration in housing market conditions. It is the well-recognized seasonal pattern in housing markets. And we should expect to see similar softening in non-seasonally adjusted (NSA) housing data as we move through the winter months.

A more informative way to evaluate NSA data is to consider the current level compared to the same time last year, thus removing seasonal effects. On this basis the 10 and 20 city composites are up 3.4% and 4.3%, respectively, from last October. Eighteen of the 20 cities are above last October’s level, representing a much better performance than the monthly numbers suggest.

And given both the seasonal patterns and the varying degrees of housing boom and bust cycle experienced across markets it is worth considering where prices are now compared to where they hit bottom in any market. By this measure all 20 composite cities have hit bottom and turned around with increases ranging from 5% to 24% and averaging 12%.

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But any of these simple statistics can present misleading signals. The healthiest markets are not necessarily the markets showing the most improvement. The Denver and Dallas markets post modest gains because they were the most immune to the boom and bust cycle. At the other extreme Phoenix and Detroit have among the strongest gains but with very different underlying historical experiences. The best analysis is to consider the full and most recent history of the price indexes in any given market.

For full histories of the 10 and 20 city composites and the component cities click here cs.


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