Wikinvest Wire

How low can you go?

Tuesday, March 25, 2008

Standard and Poor's released the January data for the S&P/Case-Shiller Home Price Indices showing an 11.4 percent year-over-year decline for the 10-City Composite Index, the steepest decline on record. Indices for individual cities are shown below:Poor Detroit - where they got the housing bust without the housing boom - is now in negative territory. Home prices are now below where they were in January of 2000 and the scale in the chart above had to be adjusted to take that into account (a common occurrence around here these days).

David M. Blitzer, Chairman of the Index Committee at Standard & Poor's noted:

“Unfortunately it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007. Home prices continue to fall, decelerate and reach record lows across the nation. No markets seem to be completely immune from the housing crisis, with 19 of the 20 metro areas reporting annual declines in January and the remaining – Charlotte North Carolina – eking out a benign 1.8% growth rate.

Looking deeper into the data, you can see that 16 of the metro areas are also reporting record low annual growth rates. The monthly data show that every one of the MSAs has now declined every month since September 2007, marking five consecutive months. On top of that, the declines have increased through time, in general, as 13 of the 20 MSAs reported their single largest monthly decline in January."
Hey, what happened to the monthly comments by Robert Shiller?

In tabular form, the January data looks like this:
Gee, just a few years ago, who would have thought that Las Vegas, Miami, and Phoenix would be closing in on 20 percent year-over-year home price declines and that Southern California would not be far behind?

Things were going so good in all those areas.

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Vespucian said...

Shouldn't the top of the Home Price chart from MacroMarkets read "Jan 2000 - Jan 2008"? Not 2007?

Tim said...

Yes, unlike nearly everything else associated with the housing market, that's a problem that is easily fixed. Also, it's now officially a Standard and Poor's index which might be why Shiller isn't asked to comment anymore.

Thanks for letting me know.

Pool Shark said...

So now that S&P owns it, how long until they start twiddling the numbers (ala CPI) to make everyone feel better about the housing market?

Not to worry, even S&P with their bogus ratings can't prevent the housing bottom that will occur in 2013.

dearieme said...

Thank goodness Shiller's silence is explained; I had worried that he'd fallen silent because his views implied catastrophe.

Anonymous said...

I think Detroit is NOT QUITE back to Jan 2000 at an index of 100.17

but they certainly will be.

Tim said...

anon 10:01:

You're right - my conclusion had more to do with the width of the line than the actual value.

Sorry about that Detroit ;>

ndd said...

Tim, as per usual I would love to see an update of the Case-Schiller CPI. Well, in particular if it looks like it is about to enter negative territory.


Tim said...

OK - sometime later this week or next

Anonymous said...

Could you add a new column to the table for %decline from peak?

Tim said...

That table is a cut-and-paste from the Standard and Poor's report so it's not easy to add, but that would be good information to see.
I'll have to see what can be done...

Anonymous said...

It would be nice to see an inflation-adjusted version of this like they did at Calculated Risk blog BUT with all the 20 cities.

Thank you for doing all this. It sure helps clarify my thinking.

pft said...

Still looks to me like it is a crisis limited to certain areas (CA, FL, NV, AZ, DC). Localized.

Other markets seem to be experiencing a milder correction, but they did not inflate anything near the others, and even those markets which did not inflate, like Detroit, they are likely being affected by the credit crunch and higher rates, as well as the national hysteria the bubble states have induced.

I think if the coverage emphasized the localized nature of the crisis, other markets would calm down.

Anonymous said...

dear pft

Two issues here: Who had a bubble and who suffers from the poorly written mortgages.

Here in Minneapolis we knew prices had gotten higher than they might normally be but did not feel we were the bubble. Note we had the 13th highest peak out of 20 in the chart above.

However, we have a large mess now due to foreclosures.
1. Some neighborhoods have many vacant foreclosed houses. I recall a number like 800 for one area but cannot find the source to cite at this moment.

2 Due to the slice n dice securitization of mortgages wherein it is unclear WHO owns a repossesed house and the arms-length operating mode of companies wherein when they are already in tough financial condition plus these houses will be a long time on the market they thus abandon the one is taking care of many of these structures.
This results in:
a. due to high metals prices a few houses in some neighborhoods have been stripped of all copper wire and plumbing. This leaves behind a structure that is almost worthless when considering the repair cost.
But the city can't simply drive over with a bulldozer and flatten it.
b. The winter in Minnesota was a cold one. Natural gas prices were moderately high and the monthly bills were big. No one pays the bills on abandoned buildings. The pipes were never drained and thus burst from frozen water and when the thaw comes the house is flooded.
c. Now the city of Minneapolis is trying a neighborhood adopt-a-house program... Spring is coming and grass will need to be mowed.

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