The latest Case Shiller report is negative 3.5%. The S&P Press Release headline is “Home Price Gains Continue to Moderate”. What is moderate about dropping from 16.0% in March to -3.5% in two months? Case Shiller announced a year over year change of 9.3% . Focusing on year over year number misses what is happening now. The following chart illustrates the Case Shiller monthly price change (seasonally adjusted at an annual rate) compared to the three month moving average.
The moving average confirms the peak in March and April prices followed by a sharp as investors left the market and buyers became more cautious. Prices moved in a band between 10 and 12 % growth until peaking at 16% before falling precipitously.
After the end of the house purchase credit in June of 2010 prices were negative. The market reacted to restoration of lower FHA loan limits in November 2011 and rebounded, peaking in May 2012. Prices declined in June but the euphoria about price increases lead investors and buyers to pile in, creating the peak in March and April of 2013.
The following Table illustrates the two month decline by city. To aid understanding these cities are combined into groups of cites that are similar but definitely not the same. The cities are with two exceptions grouped by the increase in price from the start of the bubble in June 1997 to the peak in June 2006.
Only 2 smaller Markets were positive Tampa and Charlotte. The index dropped 20 percentage points in the last two months. March closings were largely negotiated in January while May closings were negotiated in March. The 2014 spring market is weaker. It is possible that the activity in 2012 and 2013 moved aggressive purchasers forward and that the current buyers are much more cautious on price. The last two months prices are likely to be a better indicator of prices than the current three month moving average.