Home Price Appreciation Near Frozen In December

Posted by Patrick Barnard on February 25, 2014 No Comments
Categories : Residential Mortgage

Home price appreciation lost some momentum in December, declining 0.3% compared to November, according to the S&P/Case-Shiller Home Price Indices.

Despite the dip, U.S. home prices finished the year 11.3% higher compared to 2012.

Still, home prices are about 20% below their June 2006 peak, according to the report.

In December, the index's 10-city composite (measuring home sales data in the top 10 largest U.S. cities) remained relatively unchanged, while the 20-city composite (measuring home sales data in the top 20 largest U.S. cities) experienced its second consecutive monthly decline of 0.1%.

Year-over-year, the 10-city and 20-city composites posted gains of 13.6% and 13.4%, respectively – approximately 30 basis points lower than their November rates.

Trends noted in the report are as follows: Chicago experienced its highest year-over-year return since December 1988. Dallas set a new peak and posted its largest annual gain since the index's inception in 2000. Denver declined -0.1% and is now -0.7% below its all-time index-level high set in September 2013.

‘The S&P/Case-Shiller Home Price Index ended its best year since 2005,’ says David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, in a release. ‘However, gains are slowing from month-to-month, and the strongest part of the recovery in home values may be over. Year-over-year values for the two monthly composites weakened, and the quarterly national index barely improved. The seasonally adjusted data also exhibit some softness and loss of momentum.’

Phoenix, which led the recovery in 2012, saw home prices decline -0.3% in December, compared to November, after 26 months of consecutive gains.

Las Vegas, Los Angeles and San Francisco were the top three performing cities of 2013, with gains of more than 20%.

The Sun Belt, with the exception of Dallas, Miami and Tampa, saw some slowing of home price appreciation compared to November.

Cities with the highest year-over-year home price increases for 2013 included Las Vegas, San Francisco, Los Angeles, Atlanta, San Diego and Detroit. Cities with the lowest home price gains for the year included Denver, Washington, D.C., and New York.

‘Recent economic reports suggest a bleaker picture for housing,’ Blitzer warns in the release. ‘Existing home sales fell 5.1 percent in January from December to the slowest pace in over a year. Permits for new residential construction and housing starts were both down and below expectations.’

Blitzer says while harsh winter weather is partly to blame for the dip in sales volume, ‘higher home prices and mortgage rates are taking a toll on affordability.’

‘Mortgage default rates, as shown by the S&P/Experian Consumer Credit Default Index, are back to their pre-crisis levels, but bank lending standards remain strict,’ he notes.

Only six cities – Dallas, Las Vegas, Miami, San Francisco, Tampa and Washington – posted home price gains for the month of December.

Miami held its leadership position with an increase of 0.9%, followed by Las Vegas, with an increase of 0.4%.

Atlanta, Detroit and Los Angeles remained relatively unchanged, compared to November – and Detroit was the only city below its January 2000 level.

Although Chicago declined -0.5%, month-over-month, the city improved considerably from its decline of -1.2% in November. Cleveland posted the largest decline for December – it also showed the most deceleration, with a gain of 0.2% in November to a decline of -1.2% in December.

Meanwhile, the Federal Housing Finance Administration's (FHFA) quarterly HPI report – also released today – shows that home prices increased 1.2% in the fourth quarter of 2013, compared to the third quarter. Similar to the S&P/Case-Shiller HPI, the FHFA's data shows that home prices increased a mere 0.8% in December compared to November.

Still, home prices were up 7.7% in the fourth quarter of 2013 compared to the fourth quarter of 2012, according to the FHFA's data, which factors in data from the Federal Housing Administration/U.S. Department of Housing and Urban Development.

Yesterday, Black Knight Financial Services (formerly Lender Processing Services' data and analytics division) released its monthly HPI report, also showing that home price appreciation was pretty much flat in December, rising only about 0.1% compared to November.

The Black Knight HPI, however, uses a different methodology compared to the S&P/Case-Shiller HPI. The Black Knight HPI combines the company's property and loan-level databases to produce a repeat sales analysis of home prices as of their transaction dates for each of more than 18,500 U.S. ZIP codes – while the S&P/Case-Shiller HPI is based on activity recorded in the 20 largest U.S. cities.

CoreLogic's HPI report, released earlier this month, also shows similar results. According to that report, home prices increased a mere 1% in December (up 0.2% including distressed sales), compared to November. Still, the report shows that home prices were up 11% compared to December 2012 (up 9.9% excluding distressed sales). The report notes that, as of December, home prices had increased on a year-over-year basis for 22 consecutive months.

Including distressed sales, the five states with the highest home price gains, year-over-year, were Nevada (23.9%), California (19.7%), Michigan (14%), Oregon (13.7%) and Georgia (12.8%). Excluding distressed sales, states that saw the highest appreciation, year-over-year, were Nevada (20%), California (16.2%), Idaho (12.8%), Oregon (11.6%) and Florida (11.5%).

Including distressed sales, states that saw prices depreciate in December included Arkansas (down -1.5%), New Mexico (down -1.3%) and Mississippi (down -0.2%).

To access the S&P/Case-Shiller monthly HPI, click here.

To access the FHFA quarterly HPI, click here.

To access Black Knight Financial Services' monthly HPI, click here.

To access CoreLogic's monthly HPI, click here.

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