S&P: Seasonal Improvement in Home Prices in Dallas and Elsewhere

Data through May 2011, released by S&P Indices for its S&P/CaseShiller Home Price Indices, the leading measure of U.S. home prices, showed a second consecutive month of increase in prices for the 10- and 20-City Composites. The 10- and 20-City Composites were up 1.1 percent and 1.0 percent, respectively, in May over April. Sixteen of the 20 MSAs and both Composites posted positive monthly increases; Detroit, Las Vegas and Tampa were down over the month and Phoenix was unchanged.

Dalls showed a gain of .4 percent during the month and a 4.7 percent decline over a year period.

On an annual basis, Washington DC was the only MSA with a positive rate of change, up 1.3 percent. The remaining 19 MSAs and the 10- and 20- City Composites were down in May 2011 versus the same month last year. Minneapolis fared the worst posting a double-digit decline 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.

“May’s report showed unusually large revisions across some of the MSAs. In particular, Detroit, New York, Tampa and Washington DC all saw above normal revisions. Our sales pairs data indicate that these markets reported a lot more sales from prior months, which caused the revisions. The lag in reporting home sales in these markets has increased over the past few months. Also, when sales volumes are relatively low, as is the case right now, revisions are more noticeable.

“Other recent housing statistics show that single-family housing starts were up moderately in June, and are at about the same pace as a year ago. Existing-home sales were flat in June, reportedly because of contract cancellations and tight credit. The S&P/Experian Consumer Credit Default indices showed a continuing decline in mortgage default rates since last winter. Other reports confirm that banks have tightened lending standards in the past year, making it harder to qualify for a mortgage despite very low interest rates.

Combined, these data all support a continuation of the ‘bounce-along-the-bottom’ scenario we have witnessed in the housing market over the past two years.

“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 percent and the 20-City Composite was down 4.5 percent in May 2011 versus May 2010. Minneapolis posted a double-digit decline in annual rate of 11.7 percent. The only beacon of hope was Washington D.C. with a +1.3 percent annual growth rate and a +2.4 percent 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.”