Parsing the S&P / Case-Shiller August 2009 Housing Report

Includes: ITB, XHB
by: Sold At The Top

Today’s release of the S&P/Case-Shiller (CSI) home price indices for August 2009 showed a continued, yet notably weaker, bounce in prices with the Composite-10 index increasing 1.28% 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 beginning 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 June-August.

Now that the strongest selling months have largely been reported, look for all remaining CSI releases for 2009 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, is 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 10.63% as compared to August 2008 while the 20-city composite declined 11.32% over the same period.

Topping the list of regional peak decliners was Las Vegas at -54.95%, Phoenix at -52.33%, Miami at -46.98%, Detroit at -43.65% and Tampa at -39.76%.

Additionally, both of the broad composite indices showed significant declines slumping -30.21% for the 10-city national index and -29.30% for the 20-city national index on a peak comparison basis.

To better visualize today’s results use 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.

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 the 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.