The S&P/Case-Shiller Home Price Index
The S&P/Case-Shiller Home Price Index (or HPI) was released on Tuesday, March 25. The 20-city composite HPI recorded a gain of 13.2% year-over-year (not seasonally adjusted). The HPI was, however, down 0.1% month-over-month—its third consecutive decline.
What is the S&P/Case-Shiller Home Price Index?
The S&P/Case-Shiller Home Price Indices are designed to track price trends in typical single-family homes in specific metropolitan areas. The S&P/Case-Shiller Composite of 20 Home Price Index is a value-weighted average of the 20 metro area indices. The Index has a base value of 100 in January 2000. An Index value of 120 would mean a 20% increase in prices since January 2000, for a typical home located in the subject market. A value of 80 would indicate a 20% price decline since January 2000.
Analyzing January’s HPI reading
As we mentioned earlier, the 20-city composite HPI recorded a gain of 13.2% year-on-year (not seasonally adjusted). Twelve of the 20 cities included in the HPI posted declines, with Chicago prices declining the most (1.2%) and Las Vegas gaining the most (1.1%). This was Las Vegas’ 22nd consecutive monthly increase. The year-over-year increase for Las Vegas was ~25%. Other cities posting the largest increases were San Diego, San Francisco, Tampa, and Miami, posting the five largest increases, while Dallas and Denver reached record highs.
Robert Shiller’s take
According to Nobel Laureate Robert Shiller, co-founder of the index, the 13.2% increase is driven more by investor demand, rather than individual homebuyers, as there’s more momentum in the housing market than the stock market. But the pace of housing price increases is slowing as house price momentum wanes and we see speculative excesses in certain areas.
The next part of this series will compare the FHFA Housing Price Index and the S&P/Case-Shiller Home Price Index. We’ll also discuss how these indices impact housing sector ETFs like the State Street SPDR Homebuilders ETF (XHB), the Vanguard Mortgage-Backed Securities Index Fund (VMBS), and the iShares Barclays MBS Fixed-Rate Bond Fund (MBB) as well as and homebuilders like D.R. Horton (DHI) and Toll Brothers (TOL). To find out more, read on to Part 7 of this series.