August 26 – The S&P/Case-Shiller® Home Price Index® for June (covering sales between April and June) was released yesterday and once again the majority of the media misinterpreted it as indicating that price growth has flattened out. This is because they tend to focus almost entirely on the annual change in the index instead of the short term movements. In the last 12 months the vast majority of price increases occurred in the last 6 months and price growth was much weaker in the second half of 2014. than the first half of 2015. This is obvious when you look at the detailed chart.
If we examine how much of the annual increase in the HPI occurred in the most recent six months we find the following:
National index – 96%
20 city composite index – 93%
10 city composite index – 95%
Phoenix – 82%
In several cities prices actually went backwards in the second half of 2014 but forwards in the first half of 2015. Examples are:
Seattle – down 0.1% then up 7.5%
Washington DC – down 1.7% then up 3.3%
Chicago – down 2.4% then up 3.8%
Boston – down 0.7%, then up 4.1%
Detroit – down 0.4% then up 6.2%
Minneapolis – down 0.6% then up 4.0%
New York – down 0.1% then up 2.9%
Cleveland – down 0.7% then up 3.6%
Local conditions were not as negative in the second half of 2014, but the most recent six months were much stronger.
Phoenix – up 0.7% then up 3.4%
The media seems to be unimpressed by the recent appreciation rate of between 4% and 6%, but this must be compared with what is happening to the price of everything else. As the FHFA put it in their recent release: “The seasonally adjusted, purchase-only HPI rose 5.4 percent from the second quarter of 2014 to the second quarter of 2015, while prices of other goods and services fell 1.4 percent. The inflation-adjusted price of homes thus rose approximately 6.9 percent over the latest year.