S&P / Case-Shiller Home Price Numbers

In our last post we looked at the composite index for housing. Below is a table of the month-over-month and year-over-year changes in median home prices in the 20 cities that Case/Shiller tracks. As shown, only two cities (Detroit and Las Vegas) showed month-over-month declines. It's interesting that Detroit was down while Cleveland was up 4.18%. On a year-over-year basis, Cleveland, Dallas, Boston, and Denver are getting close to posting a positive change. If the trend continues, we should see an up arrow some time in the next couple of months.

Many potential homebuyers and/or investors have been waiting for signs that a bottom is in before going out and making a real estate purchase. With the S&P/Case-Shiller housing numbers showing nice month-over-month increases in the last two months, a rush to get back into the market could be on the way, which would push prices higher and higher. Just as there was a rush to get out of the market for fear of not being able to sell near the peak in housing, potential buyers are probably beginning to worry that they could lose out on the good deals that are out there. This type of investor psyche is what pushes markets of any kind higher.

Below we highlight historical charts of the year-over-year monthly change in home prices for the 20 cities as well as the 20-city and 10-city composite indices. As you'll see in the charts, the numbers have clearly been getting better in recent months.

click to enlarge

Comments

[Donald Ingram:]

What worries me about these latest stats from Case-Shiller is their seasonal adjustment, which I consider to be insufficient. When digging into who is buying these existing homes, one finds these are not owner occupied. Which tells me that there is a run to hard assets from cash positions, led by investors and speculators.
This is a blip in the housing market considering the amount of supply to come onto the market as foreclosures proceed and banks releasing housing units that have been held back. Housing recovery? Don't hold your breath. More correction to come.

Aug 25 04:12 PM

[HardwoodFlo...:]

Don, Huh, why would seasonal adjustments make you worry? If you look back (historical) at a composite they don't seem to be skewed. What I mean is do they seem to take into account a "summer" buying season or not?

I don't know looking back over the history it's pretty clear that prices (historically) m/m escalate over building up to june % preak then moderate. i don't know about holding my breath or anything else the data seems pretty clear there shoulnd't be serious upticks in pricing until next spring. All you have to do is look at the CS m/m graph going back to 2000.

Aug 25 04:25 PM

[whidbey:]

/C/S only a sample and it is conclusive of not too much about the broad market in the US.

The facts are the housing market is moving a little because house prices are now attractive compared to historical prices. But we know from past studies that the number of buyers is very limited and the prices they will pay extremely low, so this little twitter in the market must be discounted for what it is - a testing of the markets, not the harbinger of a new move in housing.
Remember the basics. No jobs, no credit, no security and no new market. The Administration always starts its policy at step 5, not step one.

Aug 25 06:05 PM

[HardwoodFlo...:]

Whidbey- Ahmen.

Aug 25 06:08 PM

[Hexan:]

One of the first things I learned in business school is that when you go down 50% and then go up 50%, you're not back to even.

1. Look at the absolute numbers, a 5% increase in prices still represents a lot of borrowers underwater.

2. Builders simply could not build less homes. Many of the current homes being built are either in areas with expansion (e.g. Texas), or very wealthy people (custom homes) who held off earlier in the year.

3. Foreclosures are still being mitigated by the H4H program(s), forbearance, or bank REO's unable to sell (due to solvency concerns).

4. Housing prices in Japan fell slowly for 17 years after the bubble burst there. Prices here could glide down or stay near their current price range for a long time.

5. Boomers transitioning to empty-nesters will continue to sell larger houses at an increasing pace as they approach retirement. Boomers vastly outnumber younger potential buyers. This is a long term trend and will depress any upward price movement.

Aug 25 06:23 PM

[Mr. Ed, Jr.:]

There is a bit of a problem with taking the numbers at face value....

First, this is homebuying season, and a small uptick in prices is to be expected.

The government's $8k tax credit expires in November, so we have some extra demand as buyers need to get the property closed to get the credit.

RealtyTrac has been saying for some time that there are an estimated 600,000 properties being held off the market by the banks, so as not to do additional pricing damage.

We have seen record high NOD's recorded in 3 separate months so far this year. That means record foreclosures early next year. And the pace of NOD's is not slowing in any appreciable manner.

Numerous banks have even slowed or stopped the foreclosure process, as they are in no rush to add to their inventory, which would force them to take the writeoff. And then, of course, there is the expense of maintaining the property while it sits vacant....better in many cases to stall the process.

Unemployment continues to rise, and that will certainly keep the law of supply and demand in firm control.

And, as others have commented, there are many shoes waiting to drop (And perhaps a grand piano or two).

When the government's $8k credit expires, we will be entering the slow season, awaiting a new glut of foreclosed properties, and with expected rising unemployment. It seems almost inconceivable that home prices, in general, can continue showing even a modest increase through all of this, even though some local markets may improve slightly.

Aug 26 03:02 AM

[kaskoosek:]

This is the place for people to put their savings, now that everyone knows that the dollar is toast in the long run.


On Aug 25 03:31 PM Bill L. wrote:

> You can't spend your house, it is not an asset meant for speculation,
> it's so you can live in it. The number one thing when buying a house
> should be, "can I afford this monthly payment?" -Not "will this double
> or triple?" Until people get this out of their heads, I'm afraid
> the housing woes will persist.

Aug 26 07:22 AM

[theseanman:]

...or even "too" early.


On Aug 25 11:21 AM conceptwizard wrote:

> We must remember that the bulk of foreclosures have not even hit
> yet. This is encouraging but way to early in the game for a positive
> outlook. Government funding wont last forever. A lot of the refis
> are starting to go bad again as well.

Aug 26 08:43 AM

[Steve Owen:]

That is right, Mr. Galt. Add to that the fact that housing markets are local. In some MSAs there was never any hot market run up and in some of those there has never been any major decline. People who try to judge the state of the housing market by following indices instead of doing solid local research are just fooling themselves.


On Aug 25 12:09 PM John Galt wrote:

> Do people go house shopping when it's warm outside or do they go
> house shopping in snow covered January? Just look at the monthly
> closings of any home builder and you will see that there ARE seasonal
> factors.
>
> Keep in mind, even "if" housing prices inch up. They have gone down
> tremendously and are being proped up by free money (8k credit), historically
> low interest rates and other government programs. If you think housing
> is going to start marching right back up, you are in for a rude awakening.
>
>
> Perma bulls like the Realators love to talk about the pent up demand
> and "people waiting for deals who finally star to buy" but always
> fail to mention the free money. the foreclosures, the shaddow inventory/
> people who are waiting to sell but haven't yet listed their home
> yet.
>
> Just think of the guy in Atlantic City who'se down a lot of money
> that just wishes he could get back to "even". There are tons of
> people that are upside down on their home loan that wish they could
> get back to even.
>
> There is a glut of housing supply so think back to economics 101
> tells you that does to pricing? Yeah, "prices" might not be very
> far from the bottom, but on a time perspective, I don't see it getting
> "better" anytime soon.

Aug 26 08:56 AM

[axelrod608:]

We need to start calling them "Surrealtors".

The price numbers reflect WHAT'S selling - low cost homes. In every city that showed price increases, there is more than a year's inventory of McMansions, which are selling like hot coffee on a sweltering day. The idea that housing prices have bottomed and are going back up is spin. Misinformation. Disinformation. Propaganda.

Aug 26 09:08 AM

[geewow:]

Unfortunately, what we are witnessing is a thin, fragile thread of good news immediately spun into a whole spool of good news. Such behavior is why they call it "Spin".

eye-on-washington.blog...

Aug 26 10:06 AM

[six:]

You are not taking into account the shadow inventory being held by the banks, both foreclosed properties not on the market and those left in default but not foreclosed. In addition you are not considering the continued decline of the job market which will lead to additional foreclosures. Lastly, the "increase" is month over month. It is almost meaningless that prices have increased in the height of the buying season with a $8K tax credit in place.

Aug 26 10:21 AM

[david darby:]

some one mentioned that a home is a place to live in and that is correct. The home speculation is over for the masses. realtors are always on there own agenda especially the economist from NAR OMG that guy is just as bad as any corrupt CEO on wall street. In regards to equities markets they are set to fall sharply and Im betting sooner than latter. 50% rise in 5 months plus is okay if your trading options but equity indexes. If your doubting me then check 1930 stock market chart on the dow. Expect the same and for home they are going down also this is a pull back on a number of reasons already mentioned above gov,seasonality,buyers on fence post etc etc. The highly unusual lending practices from late 90's until about 2 years ago is what fueled the markets. I know I sold some of those loans and in 2003 remember getting a call from my wholesale exec that they went from 50 rear-end debt ratio to 55%. Thats the same time that the option liar loans came out. Essentially pic a payment and lie about your income to qualify and that was normal for those times. BTW the gov is always last to the party and last to leave.

Aug 26 10:24 AM

[LarryG:]

Hexan, Agree with your contention in #5 but not necessarily the conclusion. Boomers have been resistant to sell their homes for less than what their neighbors got two years ago, but they are starting to lose patience and may accept true market value in the coming year or two. But they have to move somewhere and, by and large, that will be the southern U.S., where prices are likely to rise (high demand, static supply) until builders overreact again and build way more homes than prudent.


On Aug 25 06:23 PM Hexan wrote:

> One of the first things I learned in business school is that when
> you go down 50% and then go up 50%, you're not back to even.
>
> 1. Look at the absolute numbers, a 5% increase in prices still represents
> a lot of borrowers underwater.
>
> 2. Builders simply could not build less homes. Many of the current
> homes being built are either in areas with expansion (e.g. Texas),
> or very wealthy people (custom homes) who held off earlier in the
> year.
>
> 3. Foreclosures are still being mitigated by the H4H program(s),
> forbearance, or bank REO's unable to sell (due to solvency concerns).
>
>
> 4. Housing prices in Japan fell slowly for 17 years after the bubble
> burst there. Prices here could glide down or stay near their current
> price range for a long time.
>
> 5. Boomers transitioning to empty-nesters will continue to sell larger
> houses at an increasing pace as they approach retirement. Boomers
> vastly outnumber younger potential buyers. This is a long term trend
> and will depress any upward price movement.

Aug 26 10:26 AM

[John Bowman:]

chuckle> I love it when the SA members perform a stab-in-the-heart reality check to the rose-colored-glasses crowd.

Aug 26 10:56 AM

[Credit Geek:]

Hexan makes a very good point. If your $500M property in L.A. declines by 17.78% ($88,900 in dollar terms) to $411,100, and then only increases 1.08% of that $411M value ($4,440 in dollar terms) to $415,540, well the belief that there is some type of rebound is not realistic. In addition, "many potential homebuyers" still need to obtain mortgage financing, which is becoming more difficult, not easier. There is sufficient evidence in the main stream news to indicate that there are warehoused foreclosures not on the market and further evidence to indicate that there is pent up demand to sell, not buy. I truly believe that the statement "a rush to get back into the market could be on the way, which would push prices higher and higher" is not only ludicrous but irresponsible.

Aug 26 11:38 AM

[Esol Esek:]

I dont know about other markets, but Seattle is highly seasonal. People want to move here in the summer, and then move out in the winter when the lead closet arrives for six months. Plus, dont ignore the 8k incentive. Plus, every average person I know keeps telling me what a great time to buy it is. Its ridiculous. Between unemployment, CRE, bad accounting, and at least a 50% chance of another ugly fall in stocks which will scare people for good, it seems a given home prices are going down further. Just in the last month or so, I'm seeing banks selling decent houses in cheaper areas for 150k, which was unheard of in Seattle two years ago.
Meanwhile, high-end RE just sits and cries its heart out. The pain has just begun. Boomers, the biggest beneficiaries of the RE boom, are just beginning to crap their pants, and hoping against hope. When reality strikes, they will trample each other at the exits.

Aug 26 02:24 PM

[CoinMiner:]

Case-Shiller Home Price Numbers – A Deeper Look

A first glance of the recent Case-Shiller index sees seasonal strength. This is expected as summer typically provides a stronger period of both home price and demand.

Yet, will this seasonal strength provide a cyclical floor?

Let’s look at some projections in debt quality:

Fitch rating services shows a plunge in the Cure rate.

www.housingwire.com/20.../

Note that Fitch reports the CURE rate for prime plummeted from 45% to 6%. This is huge! That is, only 6% of troubled homeowners who have slipped into problems (and temporarily bailed out by taxpayer largess) will STAY out of trouble. The other 94% will sink yet again into insolvency.

And this is the report for prime loans. The subprime and Alt-A are even worse. Fitch reports that only 5% of delinquent homeowners will be able to eventually become current on their mortgage payment after rate resets.

Now, those who have been following the national US housing market already realize that the foreclosures for sub-prime homeowners has already peaked. Following near cessation of subprime home foreclosures the national housing price has only regained 1.3% - this is the heralded ‘recovery’!

More ominous clouds on the horizon are the large wave of Alt-A resets just now coming online. This wave is just as large as the subprime loans.

Per Fitch, the numbers of Alt-A debtors who can expect to survive payments is now at just 5%, and falling.

Bottom line: Sell now to the ‘speculators’, if you can.

The buying opportunity will arise in another 2-3 years.

Aug 26 02:51 PM

[petra:]

Hexan made some good points, others too. I think the tax credit (8k) is a huge driver, consider that some smaller existing homes 40 or 50 years old are available for less than 100k. That makes it much easier to come up with a down payment of 10 or 15 % and get the deal financed.
Moreover a lot of homeowners are doing owner financing, I did it myself 3 times already and until a few month ago I was pretty much the only one in town, now there are plenty and these are the homes that sells fast. BTW the interest rates are 9 to 10 %, that shows credit is still tight, and I am talking about West Texas with an unemployment rate of 5 %.

Aug 26 08:13 PM

[Investor Nirav:]

BFD! house prices always go up in summer. lets see what happens in another 6 months.

Aug 27 01:21 AM