David Rosenberg on the 'Cheery' .6% Case-Shiller Decline

David Rosenberg at Gluskin-Sheff comments on Tuesday's cheery 0.6 percent monthly decline in the 20-city Case-Shiller Home Price Index (CS-HPI).

Even Robert Shiller himself seemed excited about the fact that his own home price index was down just 0.6% in April, which admittedly compares favourably to the 2%+ slides posted since last October. But it's one month for crying out loud and we have seen these sorts of brief periods of more moderate home price declines before in this cycle that triggered premature bouts of optimism. If memory serves us correctly, in the spring of 2007, we went through about three or four months when the Case-Shiller index was declining by just 0.2% and this got a whole lot people excited that the worst was over (Alan Greenspan being one of them). Then from May to July of 2008, after a series of awful declines, the Case Shiller posted numbers of -0.8% or better – again, the moderation in the pace of decline was brief. It could well be that we have seen the worst in terms of the pace of decline, but it seems hardly reason to be enthused by the fact these 'green shoots' which are little more than noise on what is still a fundamental downtrend.

Maybe a chart would help to put the latest data into its proper context...

Well, Rosy appears to have it about right.
While it seems improbably that we'll return to the -2.0 to -2.5 percent monthly declines for a sustained period of time, you can see how a multi-month period of smaller price declines would be typical of stretches during 2007 and 2008 that were not followed by higher prices.

Comments

[fatcat:]

Wow,thats a ugly chart....the unemployed or underemployed usually don't buy houses,and now with the new rules(20% down,good credit,sufficient income,etc),the buyer pool is shrinking fast.

I don't know where this ends,but its sure not going to be pretty...

Jul 05 06:27 AM

[CautiousInv...:]

Housing has more issues than Time Magazine.

Even with signs of sales stabilization in new and existing homes, housing prices will continue to deteriorate until the market has cleared.................. that means.

Rising foreclosures, tightening lending standards, tough appraisals, increasing interest rates, falling mortgage applications ( 20% latest week ), rising unemployment, increasing personal bankruptcies, expiration of the first time buyer tax credit, failure of mortgage intervention programs, huge inventories of REO properties being withheld from the market, imminent resets on a variety of mortgages and the list goes on.

Housing is an example of a deflationary spiral when buyers know they can wait, confident prices will fall further.

Jul 05 07:03 AM

[Roger Knights:]

It looks like an oscillating downtrend.

Jul 05 09:43 AM

[manya05:]

"While it seems improbably that we'll return to the -2.0 to -2.5 percent monthly declines for a sustained period of time, you can see..." what makes you say that? it is just the oscillation of high volume in the Spring, low volume in the Winter. If you look closely, it is actually oscillating more from year to year and NOT attenuating. So I say we will see -3% or more in Jan 10, and -0.7% in Spring 10. People are dreaming, real estate has a while to drop. Only thing slowing down the decline is an Administration desperately trying to keep interest rates low and mortgage originations flowing, and banks holding on to scores of foreclosed homes that are not being dumped on the market (and legions of homeowners that would like to sell but are "holding on"). Let's face it, we have too many houses and billions and billions of square feet of over-capacity in housing (too many houses, too big). Not an easy problem to fix.

Jul 05 10:40 AM

[ain't no fo...:]

Prices may be skewing higher as delinquencies in the prime mortgage market create forced sales of higher priced homes.

Jul 05 01:38 PM