Housing: U.S. Home Price Index

The S&P/Case-Shiller National U.S. Home Price Index tracks the value of single-family housing within the United States. The index is a composite of single-family home price indices for the nine U.S. Census divisions and is calculated quarterly.
The S&P/Case-Shiller National U.S. Home Price
Index tracks the value of single-family housing within the United States. The index is a composite of
single-family home price indices for the nine U.S. Census divisions and is calculated quarterly.  

Related "Issue of the Day" Entries

Falling House Prices Spread Beyond the Sun Belt
Published Thursday, April 2nd, 2009

The slippery slope of house prices has just gotten worse as the falling trend in prices spreads beyond the usual suspects: Phoenix down 35%, Las Vegas 32% and Miami 29%. By looking at the Case-Shiller 10-City House Prices, the crash has spread to Minneapolis, down 20%, and Chicago 16%. Even the ones who have held up well are beginning to slip as San Francisco dropped 32%, New York down 10%, both falling rapidly in the last 3 months. The best performing cities were Denver, which dropped 4.0%, Dallas 4.3%, Cleveland 6.1% and Boston 7.0%.

The last great decline lasted from 1987-1991 and did not recover its former peak until 2000. The Case-Shiller index shows quite a decline starting in 2005 lasting to the present. Worsening the trend is the number of new foreclosure starts, which rose to 243,000 from 217,000 in January. On the flip side, due in part to the lower U.S. mortgage rates, there has been a slight rise of 0.1% in purchasing mortgage applications and a 3.7% gain in refinancing applications.

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Foreclosure Fix for Underwater Mortgages
Published Friday, March 6th, 2009

In the news, President Obama’s housing foreclosure fix has opened for business on Wednesday. The program aims to help up to 9 million borrowers stay in their homes by refinancing their mortgages or adjust loans to lower monthly payments. This news comes just as a new report suggest that one in five US homeowners or 8.31 million properties with mortgages owe more to their lenders than their homes are worth.

To participate in the loan modification plan, borrowers must: have obtained their mortgage before Jan. 1, 2009; have a primary mortgage of less than $729,500; live in the property; fully document their income by providing tax returns and pay stubs; sign a statement of financial hardship; and go for counseling if their total household debt – including auto loans, credit cards and alimony – totals more than 55% of their income. The program will be in effect until the end of 2012, and the loans can only be adjusted once. The adjustment will reduce interest rates for 5 years so that borrowers’ total house payments do not exceed 38% of the homeowner’s monthly income.  The government will then subsidize servicers dollar-for-dollar to reduce the ratio to 31% or to the point of 2% interest. There are incentives for both the lenders when they readjust the loans and the homeowners if they keep up the payments.

The value of residential properties fell to $19.1 trillion at year-end from $21.5 trillion a year earlier, with half of this decline in California. The study, by First American Corelogic, stated that another 2.16 million properties could go underwater if home prices fall another 5%.

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Economic Slump Continues
Published Thursday, December 4th, 2008

A declaration of recession was made by a committee of the National Bureau of Economic Research, a private, nonprofit group of economists based in Cambridge, Massachusetts.  Federal Reserve Chairman Ben S. Bernanke stated in the wake of the declaration that the economy “will probably remain weak for a time.”

Reasons for the declaration are numerous:  The loss of 1.2 million jobs so far this year was the biggest factor in determining the starting point of the U.S. economic slump.  Followed closely by Payroll Employment which fell 240,000 jobs in October and 325,000 in November, the most since the last recession and the eleventh consecutive decline, according to Labor Department report.  The October report of jobless claims set the unemployment rate at 6.5 percent, the highest level in 14 years, according to Labor Department statistics.

Contributing to the worry, American manufacturing contracted in November at the steepest rate in 26 years, leading Europe and Asia into an intiernational industrial slump.  Also, a report from the U.S. Commerce Department showed construction spending fell 1.2 percent in October as home prices dropped dramatically.

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Deflation of Home Prices Prevails
Published Tuesday, December 2nd, 2008

As recession worries still abound, disinflation (up to 0%) and actual deflation (below 0%) are definite companions to fear.  Merrill Lynch economist David Rosenberg says, “Disinflation, or a slowdown in inflation that might turn into deflation, is more common. It happened in 1961 and 2001.”  Deflation is defined as a cut in prices by companies to encourage buying which is triggered by a continued fall in consumer demand.  If a deflation across the board should occur, the best defense is a cut in the rate.  Since 2007, the Fed has slashed the rate at 5.7% to the current rate of 1%, which leaves little space to maneuver.

As prices decline in the housing market, would-be buyers are putting off purchases in hopes of getting better discounts later, and that drop in demand can lower prices further.   Since 2007, Standard and Poor’s Case-Shiller Home Price Indices, the leading measure of home prices for existing Single-Family homes, have dropped dramatically.  As of September 2008, the decline for the 10-City fell from its peek of 23.4% at an annual rate of 18.6%; the 20-City fell 21.8% with an annual rate of 17.4%; and U.S. National has dropped 21.0%.  Accordingly, the National Index is at the level or pricing previously held in 2004.  City wise, Phoenix had the worst decilne at 31.9%, while Dallas and Charlette faired better, in single digit decline of -2.7% and -3.5%, respectively.

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Lowering the Mortgage Rate
Published Wednesday, November 26th, 2008

The Federal Reserve has announced that it will buy up to $500 billion in so-called agency debt as well as up to $100 billion in direct debt from Fannie Mae and Freddie Mac as well as Federal Home Loan Banks.  The fed hopes to increase demand for existing homes and help homeowners to refinance to lower rates to 4.5%.

Historically, the rate has not fallen below 5.37% in more than 45 years.  Last month, the Fed drove down mortgage rates from 6.06% to 5.5% which prompted a rush on mortgage applications, of which 69.1% were refinancing applications.  The rate according to Michael Larson, a housing analyst at Weiss Research, was “a big, early Christmas gift for borrowers who have enough equity — and solid enough credit — to qualify for a refinance loan.”  Many of the applicants who are trying to refinance will find that the housing market’s slump in home prices has caused nearly 15% or 12 million homes to be worth less than their mortgage and will not qualify for a refinance.

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Learn More

Standard and Poor's: Case-Shiller Home Price Index - http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/2,3,4,0,0,0,0,0,0,0,0,0,0,0,0,0.html
The S&P/Case-Shiller Home Price Indices measures the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States. These indices use the repeat sales pricing technique to measure housing markets.

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