Case-Shiller Price Index, Consumer Confidence

10 MSAs showed stronger prices for the month compared to July, but only 2 were stronger than August of 2010 (Washington, DC and Detroit).

Palm Coast, FL – October 25, 2011 – Each day the National Association of Realtors ® Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights the Case-Shiller price index and consumer confidence.

• Home prices rose for the fifth straight month according to the Case-Shiller price index.  However, due to declines  last autumn and winter, prices are down from one year ago.
• This morning’s release of the Case-Shiller index showed continued firming on a year-over-year basis as the 20-city index improved to -3.8% over the 12-month period ending in August from -4.2% a month earlier.  Compared to July, the 20-city index (non-seasonally adjusted) showed an improvement of 0.2%, sharply down from the previous 4 months’ pace as the normal, seasonal decline in prices begins to weigh on the index.
• 10 MSAs showed stronger prices for the month compared to July, but only 2 were stronger than August of 2010 (Washington, DC and Detroit).  However, 16 of the 20 MSAs monitored showed an improvement in this 12-month measure of growth relative to when it was taken in July.   The Case-Shiller index incorporates data for the three months of June, July, and August so this month’s reading does not yet reflect the more recent price trend that showed up in NAR’s release of September price data last week.
• Consumer confidence took an unexpected dip in September, falling to its lowest level since March of 2009 and approaching levels last seen at the bottom of the recent “Great Recession”.  A sharply lower outlook on the present situations drove the index downward with concerns over employment and income.
• The Federal Housing Finance Agency also released its monthly same-sale price index this morning.  On a year-over-year basis, the FHFA’s non-seasonally adjusted index was unchanged from last month’s measure at 4.0%.  The FHFA’s index only includes loans that were bought or guaranteed by Fannie Mae or Freddie Mac.
• The Case-Shiller index continued to show a modest improvement in the gap from last year’s prices, while the FHFA’s index was flat.  The unadjusted month-to-month changes will decline in the fall as is the typical seasonal pattern, but the progress in the year-over-year measure may stall this fall as more foreclosure and REO sales have and will take place, generating downward pressure on prices.
• Of more concern are the consumer confidence numbers.  While affordability is remarkably strong and rents are rising, would-be home buyers who were already weighed down by high credit and downpayment requirements may continue to sit on the fence until job prospects improve.  While no recently employed person will buy a home, employment growth gives confidence to potential buyers that they can sustain payments.
• Jobs and confidence also help to undermine the delinquency-foreclosure spiral that has bloated inventories.  Job creation and confidence are critical to both the economic and housing recovery.

Source: National Association of Realtors®