September's S&P / Case-Shiller Shows Continued but Considerably Weaker Bounce

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Today’s release of the S&P/Case-Shiller (CSI) home price indices for September 2009 showed a continued, yet considerably weaker, bounce in prices with the Composite-10 index increasing 0.41% on a month-to-month basis.

While many of the nation’s housing markets experienced extra-seasonal activity as the result of the “first time homebuyers” tax gimmick, its effects, along with the typical seasonal bounce, are continuing to wane.

It’s important to remember that the CSI data is lagged by two months and that today’s results represent an average of prices paid from home sales closed between July-September.

Now that the strongest selling months have largely been reported, look for all remaining CSI release to indicate notable price weakness coming from typical seasonal declines as well as extra-seasonal declines as a result of notably reduced demand from activity that was “stimulated” forward into the summer by the tax sham.

Also, looking at the 1990s-era comparison charts below it's obvious that even after the main downward thrust has been reached, the housing markets have a long tough slog ahead with the ultimate bottom likely many years out…. Or if we are currently experiencing the Japanese model… decades out.

Further, it's important to remember that the 90s housing recovery played out against the backdrop of a truly unique period of growth in the wider economy fueled primarily by novel and ubiquitous technological change (cell phones, internet, personal computers, telecommunications, etc).

The 10-city composite index declined 8.5% as compared to September 2008 while the 20-city composite declined 9.36% over the same period.

Topping the list of regional peak decliners was Las Vegas at -55.35%, Phoenix at -51.96%, Miami at -46.70%, Detroit at -42.62% and Tampa at -40.12%.

Additionally, both of the broad composite indices showed significant declines slumping -29.92% for the 10-city national index and -29.06% for the 20-city national index on a peak comparison basis.

To better visualize today’s results use Blytic.com and search for “case shiller”.

The following chart shows the percent change to single family home prices given by the Case-Shiller Indices as compared to each metro's respective price peak set between 2005 and 2007.

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The following chart shows the percent change to single family home prices given by the Case-Shiller Indices as on a year-over-year basis.

The following chart shows the percent change to single family home prices given by the Case-Shiller Indices as on a month-to-month basis.

Additionally, in order to add some historical context to the perspective, I updated my “then and now” CSI charts that compare our current circumstances to the data seen during 90s housing decline.

To create the following annual charts I simply aligned the CSI data from the last month of positive year-over-year gains for both the current decline and the 90s housing bust and plotted the data with side-by-side columns.

What’s most interesting about this particular comparison is that it highlights both how young the current housing decline is and clearly shows that the latest bust has surpassed the prior bust in terms of intensity.

The “peak” chart compares the percentage change, comparing monthly CSI values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.


In this way, this chart captures all months of the downturn from the peak to trough to peak again.

As you can see the last downturn lasted 97 months (over 8 years) peak to peak including roughly 43 months of annual price declines during the heart of the downturn.

Comments

[User 495098]

For months, I have been writing on a similar theme to what you wrote, regarding buying. At a time when we should be investing/saving and/or paying down debt, it seems ironic to spend. Most of my writing deals with local governments commiting property taxpayers to additional debt when the dollar has been hit as hard as it has. Holiday spending...little as possible.


On Nov 24 12:33 PM KILL ME wrote:

> On November 27, 2009 all of America will run to buy gifts for Christmas,
> this is already presented like a Gold Rush and shoppers are urged
> not to miss a thing on sale.
> Analysts are pushing sales estimates Sky High and accordingly Wall
> Street trading desks are buying, buying, buying.
> And all this markets buying in centered around one thing, which is
> YOU the shopper.
> I don't urge you not to buy, all I want to say is that whatever you
> will buy, it will be more things than last year but worth less money.
>
> When numbers will be revised, the selling panic will follow and you
> will have much less money and much more debt on January 1, 2010.
>
> Whatever will happen this shopping season, know one thing: DJIA will
> never break 11000 level, so if you are long stocks and I know you
> are long because you hold it since 2008, the maximum the market will
> go up is 6-8%, to the downside it will go below 6800 on the DJIA.
> xrl.us/bgdpbs
>
> Think if this risk/reward is right for your future.

2009 Nov 24 03:21 PM

[Russ Wetherill]

The home prices peaked in August. If the 3-month moving average is factored out, the September 10-city comp data dropped by 1.1%. This is roughly equal to the gain in August. The approximately 2-3% month-over-month July rise is keeping the September number slightly positive.

2009 Nov 24 03:38 PM

[valuestocksonly]

You cannot buy if you feel as if your job is in jeopardy. Alot of people would love to buy, the only ones buying here north of Los Angeles are asian cash investors.


On Nov 25 03:58 AM Tempo dulu wrote:

> when everything's down, BUY. The US population will soar in the years
> to come, think about it people...

2009 Nov 25 08:31 AM

[Robespierre]

I'm willing to bet a very much worthless dollar that the drop on house prices will look much much worst when priced in terms of say gold for instance. Is there such graph anywhere?

2009 Nov 25 10:36 AM