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Case Shiller Says The Bottom Is Not In For Real Estate

As much as my real estate broker insists that the bottom is in for residential real estate, the raw and unvarnished data still does not support that belief. This morning, the February S&P 500 Case Shiller real estate index put in new lows for nine major markets, as well as for both composite indexes. Overall, prices are down 3.5% YOY. That takes us back to Q3, 2002 levels. It is now officially a lost decade for housing.

The foreclosure disaster in Atlanta continues unabated, with prices there down 2.5% MOM. It was followed by Chicago, -2.5%, and Cleveland, 1.7%. Believe it or not, prices in Detroit are still falling, down 1.3% MOM, and are below 1992 levels. Obtaining bank financing is still a major hurdle for many buyers. Unless you have a FICO score of over 700, the world doesn't want to know you.

We received additional data today indicating that all is not well in River City. March new home sales absolutely collapsed by -7.1% in March, compared to a gain of +7.3% in February. It is obvious that good winter weather pulled forward demand at the expense of the current quarter. This has ominous implications for the broader economy. Did other industries see this as well?

I have been mercilessly beating up on the residential sector for seven years now. Telling people that their homes, their principal asset, still had farther to fall got me disinvited from the last dinner party years ago. The best case you can make is that we are bumping along a bottom, supported by the lowest interest rates and highest affordably in 50 years. But we are going to be here a long time. As long as the demographic headwinds remain at gale force strength, rent, don't buy.

By the way, I had a fascinating dinner with Robert Shiller, the Yale economics professor who created this index from whole cloth. When I get some time, I'll write it up.