Remember April? That's when the US stock market peaked. It also occurred right after March when the peak effect of the record warm winter weather hit, resulting in peak forward pulled demand. Sure enough, today's Case Shiller index confirmed that: in April the Top 20 SA Composite Index rose by a respectable 0.67%: not a bad sign considering until February it had declined for 20 consecutive months. The issue, however, is that the April increase was already lower than the March revision, which in turn had seen a 0.73% increase which was the highest since August 2009. Which means precisely what the chart below indicates: a continuous lower trendline in home prices, with delayed monthly noise based on what the S&P does. And with the S&P plunging in May, expect a comparable response in housing price when the data is finally released. At the end of July. By then, however, we may have bigger issues. Finally, those hoping that the Fed is looking at this indicator as permissive of more negative feedback easing, will be disappointed: the Fed will need to see at least one full period of a sustained decline. So far not so good.
From the report:
April’s data indicate that on an annual basis home prices fell by 2.2% for the 10-City Composite and by 1.9% for the 20-City Composites, versus April 2011. While still negative, this is an improvement over the annual rates of -2.9% and -2.6% recorded for the month of March 2012. Both Composites and 18 of the 20 MSAs saw increases in annual returns in April compared to those published for March; only Detroit and New York fared worse in April, posting annual returns of +1.2% and -3.8% respectively, falling below their March returns of +3.9% and -3.0%. For the seventh consecutive month, Atlanta posted the only doubledigit negative annual return at -17.0%, its 22nd consecutive month of negative annual returns. Ten of the 20 MSAs saw positive annual returns – Boston, Charlotte, Dallas, Denver, Detroit, Miami, Minneapolis, Phoenix, Tampa and Washington D.C. No cities posted new lows in April 2012.
“With April 2012 data, we finally saw some rising home prices,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “On a monthly basis, 19 of the 20 MSAs and both Composites rose in April over March. Detroit was the only city that saw prices fall, down 3.6%. In addition, 18 of the 20 MSAs and both Composites saw better annual rates of return. It has been a long time since we enjoyed such broad-based gains. While one month does not make a trend, particularly during seasonally strong buying months, the combination of rising positive monthly index levels and improving annual returns is a good sign. The 10-City and 20-City Composites each rose by 1.3% for the month and posted annual rates of return of -2.2% and -1.9% compared to April 2011, better than the -2.9% and -2.6% annual rates seen in March 2012.
“We were hoping to see some improvement in April. First, changes in home prices are very seasonal, with the spring and early summer being the most active buying months. Second, while not as strong and we believe less reliable, the seasonally adjusted data were also largely positive, a possible sign that the increase in prices may be due to more than just the expected surge in spring sales. Additionally, the last few months have seen increased sales and housing starts amidst a lot of talk of better housing markets, so some price gains were anticipated.
“Detroit and New York stand out this month as the only two MSAs that saw their annual rates of return deteriorate compared to March. While Detroit posted a positive annual rate of 1.2%, it was still well below March’s +3.9%; New York was -3.8% in April down from -3.0% in March. Detroit was also the only city to show a monthly decline, down 3.6%. All other MSAs improved versus March.
“Atlanta and Phoenix, two markets we have followed closely in 2012 for their contrasting trends, have continued along their opposite paths. Atlanta continues to be the only city with double-digit negative annual returns, -17.0%, whereas Phoenix fared the best in terms of annual returns at +8.6% in April.”