Seasonal Factors Behind Housing Price Gains

July 26, 2011 (Chris Moore)

Home prices increased for a second consecutive month according to the S&P/Case-Shiller Home Price Indices (HPI) as both the 10- and 20-City Composites showed improvement in home prices due to seasonal sales factors.

Home prices for the 10-City composite increased 1.1 percent from April to May while prices for the 20-City Composite increased 1.0 percent.

Positive monthly increases were registered in 16 of the 20 metropolitan statistical areas (MSA) with only Detroit, Las Vegas, and Tampa experiencing declines and Phoenix was unchanged.

In addition, Detroit, Las Vegas, and Tampa all posted new index lows in May with home prices in the three cities now 51.2 percent, 59.3 percent, and 47.5 percent below their 2005-2006 peak price levels, respectively.

Compared to home prices a year ago, only Washington D.C. registered an increase, up 1.3 percent. Minneapolis had the worse showing with a decline in prices of 11.7 percent.

“We see some seasonal improvements with May’s data,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “This is a seasonal period of stronger demand for houses, so monthly price increases are to be expected and were seen in 16 of the 20 cities. The exceptions where prices fell were Detroit, Las Vegas and Tampa. However, 19 of 20 cities saw prices drop over the last 12 months. The concern is that much of the monthly gains are only seasonal.”

Data from both the 10- and 20-City Composites shows that as of May 2011, average home prices across the United States are back to the levels they were in the summer of 2003.

From market peak in June/July through May 2011, the 10-City Composite has declined 32.1 percent while the 20 City Composite has dropped 32.3 percent.

From peak to its trough in April 2009, the 10-City Composite has declined 33.5 percent while the 20-City Composite, which reached its trough in March 2011, has declined 33.3 percent.

“While the monthly data were encouraging, most MSAs and both Composites fared poorly in annual terms. Nineteen of the 20 MSAs and the two Composites posted negative annual growth rates in May 2011. The 10-City Composite was down 3.6% and the 20-City Composite was down 4.5% in May 2011 versus May 2010. Minneapolis posted a double-digit decline in annual rate of 11.7%. The only beacon of hope was Washington D.C. with a +1.3% annual growth rate and a +2.4% monthly increase. We have now seen two consecutive months of generally improving prices; however, we might have a long way to go before we see a real recovery. Sustained increases in home prices over several months and better annual results need to be seen before we can confirm real estate market recovery,” Blitzer added.

Tags: S&P, Case-Shiller Home Price Indices, 10-City Composite, 20-City Composite, home prices, positive gains, seasonal improvements

Source:
S&P