'Seasonality' Not a Factor in June Case-Shiller Improvement

The bears dismissed Tuesday’s surprising June strength in the Case-Shiller Home Price Index as merely a reflection of the strength in home prices that typically occurs during the first half of the year--what one observer calls the annual “seasonal three-month April-June home price surge.”

Wrong! First, there’s no such thing as an annual “April-June home price surge.” The seasonal price bounce he’s thinking of usually starts in January and ends in May. By June, things tend to peter out. In particular, in six of the eight years from 2000 until 2007, the rate of monthly change in Case Shiller fell in June from May six times, by an average of 13 basis points. During the two years the rate did accelerate, it rose by just five basis points. This year, by contrast, the rate of change improved by 35 basis points.

Seasonality? I don’t think so.

It’s risky of course to put too much store in the meaning of single data point; there’s no way I’ll argue that the June Shiller data means that the beginning of a housing recovery is at hand. But it’s even riskier, it seems to me, to deny that the report was a contained some positive news. . .

Tom Brown is head of Bankstocks.com

Comments

[censeo:]

So what's your point? Did you write this because it was your day to drop 200 words into the newsletter. I'd rather hear 25 words on what you are doing right now on your Summer vacation. (Send it to Wheaties. Only.)

2008 Aug 31 08:36 AM

[1worldcurrency:]

He has no point.

2008 Aug 31 09:25 AM

[ccerenz2:]

In the first three months of this year in San Diego, we saw a significant decrease in price, somewhere between 10 and 15% depending on how you calculate it. Then, as typically happens every year, the spring buying season started in April. We saw a surge in hoimes going into escrow which many thought as the turnaround. Strangely, these homes normally would have closed starting in early May and ending in the beginning of July. But this year, the escrows took a little longer to close, thus a majority of them 'sold' in June and July'. The market usually stays strong here through August, however this year it has slowed down beginning in June. The number of homes going into escrow is much less than the number closing. So, while it's nice to
try to stay positive, what we experienced was without a doubt a spring bump, and nothing more.
Labor Day is the beginning of the slow period for San Diego. This year is going to be very interesting as activity usually stalls out during the back to school season and slowly starts to improve as Thanksgiving and Christmas approach. This, of course, is argued by many who don't bother to look at the numbers, but in any case it's pretty fair to say the market is in for a significant test on price over the next few months.

2008 Aug 31 10:45 AM

[CLH:]

His point, and its a good one, is that there is so much negative news that when something is positive the media spins it and makes it negative.

All corrections end and those who miss the bottom will wait for the next top and buy then. We call these people losers.

2008 Aug 31 10:47 AM

[glassbox:]

Agree with CLH. And censeo/squashnut, when you suggest that Tom has no point and cannot see his point, its obvious that he is not stating the point you want him to state. Sometime, one becomes so blind that they fail to see the points other make and conclude that others are not making the point.

2008 Aug 31 11:00 AM

[matty2tan:]

It's a good point! As someone who has sold new homes for the last 15 years I agree completly with his statement that the "seasonality" is actually January/June rather than April/June. If you're going to base your reasoning on a "seasonality" factor, I agree with Tom that it should be an accurate one!

2008 Aug 31 01:10 PM

[matty2tan:]

It's a good point! As someone who has sold new homes for the last 15 years I agree completly with his statement that the "seasonality" is actually January/June rather than April/June. If you're going to base your reasoning on a "seasonality" factor, I agree with Tom that it should be an accurate one!

2008 Aug 31 01:12 PM

[Tom Lindmark:]

The point is valid. Most of the blogosphere seems petrified at the thought of things improving. Nothing like watching a train wreck.

2008 Aug 31 07:20 PM

[Jimmy Lathrop:]

Look, even I abandoned my white-knuckled grip on SKF and rode the Fannie Mae bounce last week, but lets call a spade a spade.

Home sales fall once school starts and don't pick up until the school season ends. Period.

Its going to be a long cold winter. If your house is on the market and you haven't sold it by now, seventy five percent of you won't get a serious offer until April, to get you a closing date at (surprise!) the end of the school year.

matty2tan, I respect your longevity and service in the business but outside of short sales, even in New York City - the title companies, mortgage brokers, settlement agencies and real estate brokers - they are staring at their silent phone, sitting in the empty houses and waiting for spring.

2008 Aug 31 09:55 PM