Thursday, July 02, 2009
David Rosenberg at Gluskin-Sheff comments on Tuesday's cheery 0.6 percent monthly decline in the 20-city Case-Shiller Home Price Index (CS-HPI).
Even Robert Shiller himself seemed excited about the fact that his own home price index was down just 0.6% in April, which admittedly compares favourably to the 2%+ slides posted since last October. But it's one month for crying out loud and we have seen these sorts of brief periods of more moderate home price declines before in this cycle that triggered premature bouts of optimism. If memory serves us correctly, in the spring of 2007, we went through about three or four months when the Case-Shiller index was declining by just 0.2% and this got a whole lot people excited that the worst was over (Alan Greenspan being one of them). Then from May to July of 2008, after a series of awful declines, the Case Shiller posted numbers of -0.8% or better – again, the moderation in the pace of decline was brief. It could well be that we have seen the worst in terms of the pace of decline, but it seems hardly reason to be enthused by the fact these 'green shoots' which are little more than noise on what is still a fundamental downtrend.Maybe a chart would help to put the latest data into its proper context...
Well, Rosy appears to have it about right.
While it seems improbably that we'll return to the -2.0 to -2.5 percent monthly declines for a sustained period of time, you can see how a multi-month period of smaller price declines would be typical of stretches during 2007 and 2008 that were not followed by higher prices.