Home Price Index in line but real test lies ahead

The Jan S&P/Case-Shiller 20 city home price index fell .7% y/o/y, right in line with expectations. 9 of the 20 cities saw y/o/y gains, led by San Francisco, San Diego and Dallas. The decline was again led by Las Vegas which had a 17.4% y/o/y fall. Miami fell by 6.7% and Phoenix was down by 4.6%, to name 2 other hard hit areas. On a non seasonally adjusted basis, prices fell .4% m/o/m but rose .3% seasonally adjusted. While still a very important indicator since homes are the biggest collateral backing trillions of $’s of debt, the real test for the housing industry and its pricing remains ahead in the next few months as the Fed completes its MBS purchases and the home buying tax credit expires. This headwind will be met by the seasonally strongest time of the year in terms of demand, the spring, where about half of all the year’s transactions take place.

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