July Case-Shiller Indices Improve at Slower Pace

Home prices rose in July by less than 2 percent for the first time since March but still reached their highest level since August 2008, according to the ""Case-Shiller Home Price Indices"":http://www.spindices.com/documents/indexnews/announcements/20130924/53129_cshomeprice-release-0924.pdf?force_download=true released Tuesday.

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The 20-city index was up 1.8 percent in July--12.4 percent in the last year--while the companion 10-city index was up 1.9 percent--12.3 percent since July 2012.

Economists surveyed by _Bloomberg_ had expected the 20-city index to increase 2.0 percent from June, a 12.4 percent annual improvement.

All 20 cities included in the survey improved both month-to-month and year-to-year. The two surveys have improved both monthly and yearly for 14 consecutive months.

The Case-Shiller report came as the Federal Housing Finance Agency (FHFA) said its House Price Index rose in July at the fastest pace since March. The FHFA index tracks values for only those homes with loans eligible for purchase by Fannie Mae or Freddie Mac--generally those with lower values.

The Case-Shiller 20-city index rose 1.4 percent in March and then by more than 2.0 in April, May, and June. The 10-city index rose 1.3 percent in March followed by three straight months of gains greater than 2.0 percent.

The 10-city index rose to 176.52, up 3.23 from June├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós 173.29, while June├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós index was revised down from the originally reported 173.37. The 20-city index was up 2.90 from June├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós unrevised 159.59. In August 2008, the 10-city index was 176.71, and the 20-city index was 164.65.

In July, according to the National Association of Realtors, the median price of an existing single-family home dropped 0.1 percent but was up 14.7 percent from a year earlier.

Even with the slower growth in July, the two indices have improved by double digits year-over-year for five straight months, and July├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós annual growth was the strongest since [COLUMN_BREAK]

March 2006 for the 10-city index and since February 2006 for the 20-city index.

While good news for home sellers, the continued sharp increases are likely to revive concerns of a growing housing bubble as personal income growth continues to stagnate.

Still, the increase in home values, according to economic theory, should mean improved consumer spending. The ├â┬ó├óÔÇÜ┬¼├àÔÇ£wealth effect├â┬ó├óÔÇÜ┬¼├é┬Ø theory holds that consumers spend based on increase in net worth, not income. Home values accounted for about 25 percent of the increase in net worth in the first quarter, according to the latest data from the Federal Reserve.

The Case-Shiller indices have gone up for eight straight months and 14 times in the last 16; each index dipped last October and November.

Monthly increases were led by Chicago, where prices rose 3.2 percent from May to July. Prices have increased more than 3.0 percent per month in Chicago for three straight months, and the index there is at its highest level since August 2010.

Prices rose more than 2.0 percent in July in Las Vegas (2.8 percent), Detroit (2.7 percent), Tampa (2.3 percent), San Francisco (2.2 percent), Atlanta (2.2 percent), Los Angeles (2.1 percent), and San Diego (2.0 percent).

Half of the cities showing month-over-month price gains of 2.0 percent or greater were in the West; none were in the Northeast.

Prices have increased for 22 consecutive months in Phoenix, 18 straight months in Minneapolis, and 17 straight months in San Francisco and Los Angeles. The price index for Denver, according to the July report, is at its highest level since the Case-Shiller tracking began in January 1987.

The four cities with year-over-year price growth of greater than 20 percent were also in the West.

On a yearly basis, the price gains were led by Las Vegas, where prices were up 27.5 percent since July 2012, and San Francisco, where prices rose 24.8 percent in the last 12 months. Those cities were followed by Los Angeles, up 20.8 percent in the last year, and San Diego which saw a 20.4 percent year-over-year gain.

Despite the July improvement, the 10-city index is down 22.0 percent from its June 2006 high of 226.29, and the 20-city index is off 21.3 percent from its July 2006 peak of 206.52.

_Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 a.m. Eastern and follow him on Twitter at @foxeconomics._