Continuation of Negative Annual Returns in Housing

It seems that Tuesday is Housing day at the Big Picture: First, we looked at UK MEW; Then, we saw that great NYT chart;

And, since it's the last Tuesday of the month, it's Case Shiller time: Ouch!

Case Shiller Housing Index July 2007

Here's the excerpt:

"Data through July released today by Standard & Poor’s for its S&P/Case-Shiller® Home Price Indices, the leading measure of U.S. home prices, shows a continuation of negative annual returns in the 10-City Composite and the 20-City Composite, as well as 15 of the 20 metro area indices. Both composite indices have registered negative annual growth rates since the beginning of the year. In addition, both indices rate of decline has become larger in each of the seven months from January through July.

The chart above, depicting the annual returns of the 10-City Composite and the 20-City Composite, shows the 10-City Composite was down 4.5% versus July of 2006, while the 20-City Composite was down 3.9% over the same time period.

“The decline in home prices clearly continued into the summer months,” says Robert J. Shiller, Chief Economist at MacroMarkets LLC. “The year-over-year decline reported for the 10-City Composite is the lowest since July 1991. The lowest annual decline in this Index, which dates back to January 1987, was -6.3%, which was reported in April 1991. The further deceleration in prices is still apparent across the majority of regions, with 16 of the 20 metro areas showing a drop in their annual growth rate from what was reported in June.”

Bloomberg reported:

"Home prices in 20 U.S. metropolitan areas fell the most on record in July, indicating the threat to consumer spending was rising even before credit markets seized up in August, a private survey showed today.

Values dropped 3.9 percent in the 12 months through July, steeper than the 3.4 percent decrease in June, according to the S&P/Case-Shiller home-price index. The index declined in January for the first time since the group started the measure in 2001, and has receded every month since then.

Stricter lending standards and reduced demand are prolonging the housing slump, now entering its third year. Prices may continue to fall as homes stay on the market longer, economists said. Diminished housing wealth may spur households to pare spending, hurting economic growth." (emphasis added)

No bottom in sight anytime soon. My best guess is late 2008 to 2009 . . . unless we have a recession. Then, all bets are off.

Sources:
Summer Swoon Evident in the S&P/Case-Shiller® Home Price Indices
Sep 25, 2007 09:00 AM EST PDF
http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_092512.pdf

S&P/Case-Shiller Home Price Index Falls 3.9% in July
Courtney SchlissermanBloomberg, Sept. 25 2007
http://www.bloomberg.com/apps/news?pid=20601087&sid=aqOuSeaFXx3Y&

Comments

[Bob K.:]

There is no if to the recession, it is coming.

2007 Sep 25 11:00 PM

[Dogbert:]

The 170 degree (180 = vertical drop) straight line Housing Index plummet .... is truly frightening..... no attenuation, no decrease in velocity! Where can inflection point be?

2007 Sep 26 08:31 AM

[Willem D. O...:]

Excellent article

2007 Sep 26 11:43 AM