Case-Shiller Numbers Hit Seven-Year High

NEW YORK CITY-Even as the National Association of Realtors reported another monthly decline in the volume of existing homes, prices are continuing to rise, if more slowly than before. That was the news Tuesday morning from S&P Dow Jones Indices, which reported that its S&P/Case-Shiller Home Prices Indices for August posted their highest year-over-year increases since February 2006.

Both the 10-City and 20-City Composites increased 12.8% Y-O-Y for August after rising 12.3% for July. Bloomberg reported that the growth exceeded the expectations of economists, who had predicted a median of 12.5%.

All 20 cities in the Case-Shiller indices posted positive numbers Y-O-Y, with 13 posting double-digit gains, led by Las Vegas with a 29.2% rise and San Francisco with 25.4%. The other double-digit gainers were Atlanta (18.4%), Denver (10.1%), Detroit (16.4%), Los Angeles (21.7%), Miami (13.5%), Minneapolis (10.2%), Phoenix (18.6%), Portland (13.0%), San Diego (21.5%), Seattle (13.2%) and Tampa (14.1%). Of the 20 cities, only Detroit remains below its January 2000 index level, while all cities except for Dallas and Denver remain below their peaks.

“The monthly percentage changes for the 20-City composite show the peak rate of gain in home prices was last April,” says David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices. “Since then home prices continued to rise, but at a slower pace each month.”

Blitzer notes that in the latest indices, 16 cities reported smaller gains in August compared to July. “Recent increases in mortgage rates and fewer mortgage applications are two factors in these shifts,” he says.

Commenting on the latest Case-Shiller numbers, IHS Global Insights' Stephanie Karol and Patrick Newport note that the 20-City composite index “has hit a seven-year high in the same month as housing affordability reached a five-year low. While demand for housing remains as strong, credit is tight, flood insurance rates are on the rise, mortgage rates are elevated relative to recent levels and income growth has not kept pace with price growth.”

Taken together, “these conditions present temporary challenges for the housing market,” write Karol and Newport, US economists at IHS. “We expect home prices to decelerate, but solid growth should continue into next year.” The indices cover single-family homes as well as for-sale apartments.