S&P/Case-Shiller HPI: Price Appreciation Continues To Flatten

In line with data released earlier this week by the Federal Housing Finance Agency and technology vendor Lender Processing Services showing that home price appreciation is stabilizing in most areas of the U.S., the S&P/Case-Shiller Home Price Index (HPI) shows that home prices increased only about 0.2% in October, compared to September.

As per a press release, the index's 10-city and 20-city composites posted year-over-year gains of 13.6% – the highest since February 2006.

October marked the 17th consecutive month that both composites increased on an annual basis.

Still, home price appreciation is slowing. According to the report, 18 U.S. cities posted lower month-over-month increases in October compared to September. After 19 months of gains, San Francisco showed a slightly negative return. Phoenix held onto its streak and posted its 25th consecutive monthly increase.

David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, notes that although home prices continued to increase in October, ‘monthly numbers show we are living on borrowed time and the boom is fading.’

The rate of home price appreciation, however, varies considerably from state to state and city to city. In general, states and cities that were hardest hit by the economic downturn – and which saw the biggest drops in home values – are the ones seeing the biggest gains.

Still, prices are stabilizing in cities which have seen massive gains. Looking at the data on a year-over-year basis, Las Vegas, San Diego and San Francisco – cities which have seen huge increases in home values in recent months – saw smaller increases in October. Meanwhile, some of the cities that saw slower price appreciation in previous months – including Cleveland, New York and Washington, D.C. – saw comparatively greater increases during October.

Miami showed the most improvement in October, according to the index. Chicago recorded a year-over-year increase of 10.9% – its highest annual rate since December 1988. Charlotte, N.C. and Dallas posted annual increases of 8.8% and 9.7%, respectively – the highest since the inception of their indices in 1987 and 2000.

‘The key economic question facing housing is the Fed's future course to scale back quantitative easing and how this will affect mortgage rates,’ Blitzer says in the release. ‘Other housing data paint a mixed picture, suggesting that we may be close to the peak gains in prices. However, other economic data point to somewhat faster growth in the new year. Most forecasts for home prices point to single-digit growth in 2014.’

Still, home prices are, on average, about 20% below their peak level in June/July 2006.

Ten cities posted positive month-over-month returns. Las Vegas saw a 1.2% increase in home values in October, compared to September, while Miami saw a 1.1% monthly gain.

Nine cities including Atlanta, Boston, Chicago, Cleveland, Dallas, Denver, San Francisco, Seattle and Washington saw month-over-month declines in home values for October. Two of them, Denver and Dallas, are slightly off their peak set in September, the release states. New York remained flat. Only Charlotte, N.C., and Miami accelerated on a month-over-month basis.

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