No Slowdown for the Case-Shiller Home Price Declines

The January report(.pdf) for the S&P Case-Shiller Home Price Indices shows both the 10-city and 20-city index once again making new record annual declines of 19.4 percent and 19.0 percent, respectively. Price indices for all 20 cities are shown below.
The top to bottom position on the right (corresponding to the order of the legend in the upper left to aid in viewing the data) saw a few changes last month, both Phoenix and Minneapolis moving down a notch or two.

As shown below, Phoenix maintained its leadership role in year-over-year price declines with an astonishing 35 percent plunge. Las Vegas and San Francisco are not far behind with declines of more than 30 percent as indicated in red and Miami may be ready to join that select group.

Minneapolis joined the ranks of 20+ percent annual decliners, moving from -18.4 percent to -20.4 percent in January. That group now numbers six as indicated in blue.
What the heck is going on in Minneapolis with those back-to-back five percent month-to-month declines? That's the sort of thing you see in Phoenix and Las Vegas, but Minneapolis?

David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, noted:

Home prices, which peaked in mid-2006, continued their decline in 2009. There are very few bright spots that one can see in the data. Most of the nation appears to remain on a downward path, with all of the 20 metro areas reporting annual declines, and nine of the MSA’s falling more than 20% in the last year.

Indeed, the two composites are very close to that rate and have been reporting consecutive annual record declines since October 2007. The monthly data follows a similar trend, with the 10-City and 20-City Composite showing thirty consecutive months of negative returns.

You'd think that at least the pace of the price declines would slow, but it's not.

Comments

[Radardoc:]

What I find amazing is that the Los Angeles index does not even include the hardest hit counties in the area, San Bernardino and Riverside. Even without the biggest declining areas, we get the "honor" of being amongst the loosers of the month club...

Mar 31 03:30 PM

[Carl Spackler:]

Hey! I thought the recession was over judging by all the bullish headlines over the last two weeks? I guess not. Next to fall is the commercial mortgage market. Everyone lately has been calling bottom, but I just see one or two positive reports and the rest are bad like this one. Has the market gotten too far ahead of itself?

Mar 31 04:48 PM

[CautiousInv...:]

On a national basis, I believe we are about 29% off our peaks set in 2006. Most believe we have another 15 or so points to go.

These price declines.......I should think........are largely responsible for the the recent uptick in existing homes which is a healthy development.

This, though, is being offset by more homeowners going under water on their mortgage with the likely prospect of increased foreclosures.

And falling prices along with rising foreclosures just adds further pressure to those euphemistically designated legacy assets sitting on bank balance sheets that are depreciating by the day.

It blows me away that the guys steering the ship could not see that homes were becoming an asset class and would soon become subject to same dynamics and pricing flux seen in other market bubbles.

Mar 31 04:51 PM

[Just Say Whoa!:]

De-troit can't get no love!

They didn't get a bubble there, but they get hit hard now.

Anyone got change for a Five? I wanna buy a couple houses there:
www.boom2bust.com/2008.../

Mar 31 05:53 PM

[Bhakta:]

Prices are still too high relative to a person's earnings; therefore prices will fall at least 14% more IMHO. Add in the lack of credit worthy buyers and bank's new strict lending standards, the situation is more difficult.

Mar 31 05:54 PM

[BxCapricorn:]

If it was any more obvious, this graph would have to be tattooed on every stripper in Las Vegas....but not above the shoulders or below the knees. Do I make myself clear (response..."sir, yessir!")

You may go now.

Mar 31 06:06 PM

[schlumpf:]

aha, but Cramer screamed that the recession is over.

Mar 31 06:08 PM

[j_remington:]

And commercial is worth less too.

news.yahoo.com/s/ap/sk...

"BOSTON – Two companies have landed a real estate bargain: Boston's tallest skyscraper.

The John Hancock Tower was bought Tuesday for about $660 million at a foreclosure auction in New York City.

That's about half of what it cost a little more than two years ago.

The 60-story building was acquired by a partnership between Normandy Real Estate Partners and Five Mile Capital Partners.

Henry Cobb, a partner of world-renowned architect I.M. Pei, designed the building. It was completed in 1976.

It was sold after Broadway Partners defaulted on loans used to buy it in late 2006."

Mar 31 06:59 PM

[molson360:]

The guys steering the ship all jumped in the golden liferaft back in '05

On Mar 31 04:51 PM CautiousInvestor wrote:

> On a national basis, I believe we are about 29% off our peaks set
> in 2006. Most believe we have another 15 or so points to go.
>
> These price declines.......I should think........are largely responsible
> for the the recent uptick in existing homes which is a healthy development.
>
>
> This, though, is being offset by more homeowners going under water
> on their mortgage with the likely prospect of increased foreclosures.
>
>
> And falling prices along with rising foreclosures just adds further
> pressure to those euphemistically designated legacy assets sitting
> on bank balance sheets that are depreciating by the day.
>
> It blows me away that the guys steering the ship could not see that
> homes were becoming an asset class and would soon become subject
> to same dynamics and pricing flux seen in other market bubbles.<br/>
>

Mar 31 08:41 PM

[EMS:]

Yet, the markets were "Rallying" most of the day. Financials notably. Retail investors had better be ready for what is to come.

Mar 31 08:48 PM

[prudentinve...:]

Back in the 1980's, the financial media regaled us with an awesome and breathtaking statistic, that the land of the Japanese Imperial Palace in central Tokyo had a notional value that exceeded all the real estate in California.

Now they tell us that real estate in Japan has not appreciated at all in the past 25 years. Such is the fate of all bubbles. However, people still love to create, admire and cheer on every new bubble, oblivious of history's lessons.

Mar 31 09:40 PM

[HardwoodFlo...:]

Of ocurse prices are falling! Look at what people are buying- foreclosed homes and people who "have" to sell. Moreover the sales are happenign inthe overheated markets where prices have Fallen from 30-70%. Bottom feeders will seep-up the inventory over the next several months so prices will continue to fall.

Moreover, jumbo loans are impossible to get and still expensive. So the big ticket stuff isn't on the market.

There is a fair amount of backside demand out there. I agree that the job market needs to stabalize before a housing "recovery" takes place.

The truth is that 400,000 units of single family homes is a pitance of a pace for residential housing. While the remodel numbers have been in the tank for the past 3 years, as home equity lines were the first to go, people are just begining to spend real income on their up grades. I think you will see a uptick in home remodel as the consumer (M2-M3 Money Supply) retrenches.

Still, new housing contruction won't take hold for a while. When it does, there will be lot of catching up to do. Specifically, the fact that housing starts have never been this low for this long ever. It's like the remodel factor. For a while it's like pushing rope, then the slack goes out and there will be a whiplash.

The economy is so different than it was in the past. the huge amount of government workers, health care representing 30% of GDP, tech, manufacturing and the rest is so much broader now. In a way this whole cycle has seemed a bit like Y2K- with experts telling us to buy gold, stock pile guns and prepare for civil unrest- it's just crazy.

Will there be a "fast" housing recovery- no. Will there be one-yes. Will it be a more senseable recovery- yes. By all acounts 1MM single family units is below demand. That's a 100+% increase from where we are now.

Apr 02 06:08 PM