All three composite home price indices put out by S&P/Case-Shiller—including the national index, 10-city, and 20-city—hit new post-crisis lows in the first quarter, according to data released today. The national composite fell 2.0% during the quarter and was down 1.9% annually. The 10- and 20-city indices were down 2.8% and 2.6%, respectively, from the previous year. On a monthly basis, the 10-city composite declined 0.1% in March, and the 20-city index was flat.
Of the 20 metros tracked, seven saw price drops in March and 13 were down year-over-year. Atlanta performed the worst by far with a 17.7% annual decline. The once-beleaguered Phoenix area reported the strongest annual performance with a 6.1% improvement.
Despite the declines, however, the news wasn’t all bad. If seasonal factors are taken into account (the indices are not seasonally adjusted) the national index improved 1.1% during the first quarter, both the 10- and 20-city composites ticked up in March, and the number of cities reporting a monthly decline is revised to four.
"While there has been improvement in some regions, housing prices have not turned," said David Blitzer, chairman of the Index Committee at S&P Indices. He conceded that "there are some better numbers," pointing out that only three cities—Atlanta, Chicago, and Detroit— saw their annual rates of change worsen in March compared to year-over-year numbers reported in February. The remaining 17 cities and both the 10- and 20-city composites reported improvement in that area—though most still reported price drops—and seven cities boasted rates of change in positive territory. "This is what we need for a sustained recovery, monthly increases coupled with improving annual rates of change," Blitzer said. "Once we see this on a broader level, we will be able to say the market has turned around."
The indices’ declines were unexpected among most economists; consensus predictions had called for a slight uptick, especially considering the upward trend in prices seen in the FHFA home price index numbers for March. Patrick Newport, U.S. economist at IHS Global Insight, attributed that discrepancy partly to how the Case-Shiller indices weight cities. "New York and Los Angeles, where home prices have dropped 2.8% and 4.8% year-over-year, account for 48% of changes in the 10-city composite and 34% of changes in the 20-city index, and are dragging the composite indices down," he wrote in a statement discussing the numbers today. "If Houston, where home prices are rising, were included in the index instead of any one of the California cities, the Case-Shiller city composites would line up more closely with the FHFA index."
Overall, "in most cities, home prices appear to be stabilizing," he wrote, but added that further declines are likely considering that the Mortgage Bankers Association reports 11.8% of homeowners with mortgages were either late on payments or in foreclosure at the end of the first quarter. "Our view is that foreclosures, excess supply, and weak demand will drive home prices as measured by the Case-Shiller indices down a bit further, but that a bottom is in sight."
Claire Easley is a senior editor at Builder.