Case Shiller: Less Bad, But Still Considerable Weakness

The S&P/Case Shiller Home Price Indices for April 2009 were released today. The Composite-10 and Composite-20 indices showed a 18.0% and 18.1% decline respectively, making the data less bad than in the previous month. Nevertheless, there is still considerable weakness, particularly informer bubble cities like Phoenix, Las Vegas, and Miami. There, prices have been cut in half, with Phoenix now down 54.1% from the peak, Las Vegas down 52.1% and Miami down 48.1%.

Yet, this month does mark a large shift in directionality with 8 markets showing increased prices from March to April. The most inflated market now showing price upticks is Washington, where there was a large surge, perhaps due to the change in Administration. In fact, Washington D.C. is now the second most expensive market relative to prices at the beginning of this decade, with prices having risen a full 67% despite a 33% decline in values. New York is the most expensive market by this measure, prices having risen over 70%. However, prices in the NY area are now falling.

click to enlarge

I should note that these data are from April. If the trend holds, we would expect to see more markets shifting to price rises in May and June. What is striking is that most of the bubble markets are still in decline: Phoenix, LA, San Diego, Miami, Tampa, and Boston. However, San Francisco has turned up, as has Washington. And many non-bubble markets are now seeing house price appreciation.

In the UK, price appreciation started in March and has continued to the most recent survey (see post here). If the U.S. is following the same pattern, it suggests price declines are now moderating. To the degree that Washington, a market which is still very overpriced, leads the upturn in prices, one can see this as a sign that government largesse bears a large responsibility for the change in trend.

Comments

[Mad Hedge F...:]

There is so much inventory out there it is unbelievable, yet the relentless tide of foreclosures keeps dumping more properties on the market. The sickness has metastasized to commercial real estate which may be the next big shoe to fall. Look at the chart of the Case-Shiller Real Estate Price Index, which shows us back at 2003 price levels. If this were a stock, would you want to buy it? It is starting to take on the flavor of an all out capitulation. Only the 1990-1997 bottom looks safe. Stay away. Rent, don’t buy.

Jun 30 01:43 PM

[whidbey:]

The shift up was due to foreclosure sales principally and they are representative of the market - yet. Washington DC is not relevant, but the number of high end mortgages in delinquency is relevant, it means the impoverishment of America is moving ahead and up the income chain. Mad Hedge has made the relevant point, the resets due this summer/fall and the commercial market collapse is just getting into gear. Watch the withholding tax receipts down, the phaeton savings calculations, and the banks withdrawing credit from the market. This is where the action is today. We are in the lull before the next collapse in the equities due to NO JOBS

Jun 30 01:59 PM

[Accuriz:]

Several recent comments regarding the availability of financing have emerged over the past weeks discussing mortgage rates and the ability to sell/buy real estate. Contrary to popular belief, mortgage rates have more to do with the long term debt obligations of the United States, than the current value of real estate. A review of 30 year T-Bills indicates a concern of investors regarding the debt the United States is taking on. This is also reflected in the value of the American dollar, which has declined over the past several months.
In regards to mortgage financing, the markets did not stop; instead the markets went back to operational practices of 2002/03. The United States housing market is on track to sell over 4 million properties this year and the mortgage industry is on track to refinance double that number of properties. This represents about 12% of the residential housing market (4% sales and 8% refinancing).
Homeowners are receiving financing, but not necessarily at the numbers hoped for. Secondly property values are reported to be down in value because of the median sales price. The much discussed Case-Schiller Housing Index does not place a relationship of sales price to the size of the home.
Now many economists and bloggers will state that there is no relevance in Sales Price to Square Footage. To this, we state that there clearly is: Square Footage does matter.
In studies just completed, 15 of 20 major metro areas have experienced a decline in sales price compared to last year and to 2006. But the properties being sold are also smaller and by as much as 15% to 20%. As such, the decline in actual value is not as severe as reports that only analyze the Median Sales Price Indicate. The real estate market is not absolute. The base data from 2006 is different than the data from 2009.
So what is the real decline in housing values and what is the real erosion of the under lying housing market. Well it depends if you do the research or if you are an investor looking to snap up properties at bargain basement prices because incorrect information is being fed to the masses.
Conducting comprehensive research takes time and money, but many of the comments I read just rip into the process, as opposed to trying to understand the process. The markets are in flux and need some clear direction, but if we continue to post inaccurate information we will not see a housing recovery take foot for months.

Jun 30 02:52 PM

[Ted Hurlbut:]

I believe we're in a bottoming phase overall, but the housing market is likely to be a drag on any recovery. There's still too much inventory and unemployment is driving fresh foreeclosures. Housing may have led us into this, but it's not going to lead us out. And the anticipated problems in the commercial real estate market will only increase the headwind.

www.hurlbutassociates.com

Jul 01 12:53 PM