Case-Shiller Indices for October, 2009

I neglected to comment on it yesterday but the latest Case-Shiller indices of housing prices in 20 major U. S. markets for October, 2009 became available yesterday. The press release, as has been the case for some time, is confusing. The first paragraph does not adequately represent the entire report, indeed, subsequent areas of the report are in material conflict with its opening:

Data through October 2009, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the annual rate of decline of the 10-City and 20-City Composites improved compared to last month’s reading. This marks approximately nine months of improved readings in these statistics, beginning in early 2009.

Contrast that with this:

“The turn-around in home prices seen in the Spring and Summer has faded with only seven of the 20 cities seeing month-to-month gains, although all 20 continue to show improvements on a year-over-year basis. All in all, this report should be described as flat.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.

which IMO is a fairer characterization of the actual numbers. If you only read the first paragraph, you’d take away a different impression and, clearly, that’s what most of the press reports have done.

Basically, housing price have been flat on a month-to-month basis (from September to October) and have declined 15% on an annualized basis. It’s hard to characterize this as really good news.

However, as I’ve been saying for some time, we don’t have a national real estate crisis we have a local and regional real estate crisis and, when you consider the situations in the five most seriously affected markets (Las Vegas, Los Angeles, Tampa, Miami, Phoenix, Detroit), a somewhat different picture emerges.

In Las Vegas prices have declined by 26% this year alone and have continued to decline albeit only slightly from September to October.

In Los Angeles prices have declined roughly 6% this year but have risen very slightly over the last couple of months. It may well be that prices have ended their freefall in this market.

In Tampa prices have declined 15% for the year and have actually declined more for October over a decline in September. Clearly, Tampa is not out of the woods.

In Miami prices have decline 14% for the year. The decline in October essentially gave back the gains of the previous month. Prices are essentially flat there.

In Phoenix prices have declined 18% for the year but have increased in both September and October. That market appears to have turned around.

In Detroit prices have declined 15% for the year and have increased in both September and October. The increase in September was no doubt influenced by the federal subsidy for first time buyers and the October increase is so small as to be essentially flat. I doubt that Detroit’s problems are over.

Again, as I have been saying for some time, I do not believe that one size fits all. We need a policy that’s more responsive to local conditions to deal with the problems we actually have and I honestly don’t see that emerging from this government or this Congress.

6 comments… add one
  • The very anecdotal feel here in Orange County, CA is upbeat. Stores aren’t closing in the malls anymore and a few new ones have opened. The restaurants are pretty full. There are lines at the car washes. We had a hard time booking venues for a birthday party. Every Target store sold out of Xmas lights a week before Christmas. There are very few For Sale signs here in Irvine and I’m not sure what that means. But the pall is lifting I think.

  • Based on the numbers that is what I think is happening in Southern California. However, the larger question is what will the new normal be like? I seriously doubt that the next ten years will be a great deal like the last.

    And that has serious implications for California. California has based a lot of its economy for a very long time on land development and housing construction. Unless you think that California will resume where it left off, that will need to change.

    I think that demographics will be very telling.

  • Drew Link

    Setting aside arguments about “overshooting” etc the index is pretty close to long term trend. We should expect stabilization.

    As an aside, everytime I look at that graph I shake my head and ponder the index distinctively taking off like a rocket in 1996. Why? Despite all the politically motivated talk about Bush and no regulation etc……..for whatever reason that housing ship took off 5 years before he was even on the scene.

  • As an aside, everytime I look at that graph I shake my head and ponder the index distinctively taking off like a rocket in 1996.

    I know what my answer to that is: the Chinese pegging of the yuan to the dollar.

  • steve Link

    I actually like the longer term charts better too which illustrate Drew’s point. Dave’s point is well taken, but I would add that I think a lot of the tech money was starting to shift. I think another part of the answer lies somewhere in the fact that the housing price increases were also very different by locality.

    Steve

  • Drew Link

    Dave –

    I presume that is a reference to China’s export strategy, which in turn results in their US debt purchases and low interest rates.

    But they pegged in 1994. Probably more importantly, an inspection of mortgage rates (say, the 30 yr fxd) doesn’t correlate to the housing binge at all.

    I don’t have an answer, but I’m not sure the ChiComs are it.

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