Tuesday, June 30, 2009

S&P/Case-Shiller: April 2009

Today’s release of the S&P/Case-Shiller home price indices for April 2009 show continued deterioration in many regional markets while some of the most seasonal markets experienced the typical spring bounce resulting in a moderate decline to the composite indices.

April brought a significant seasonal deceleration of the month-to-month price slide with the 10-city index dropping just 0.67% and the 20-city index dropping 0.56% since March (… that’s about twice as bad as 2007 but half as bad as 2008)

It’s important to recognize that the inherent seasonality of many of the component markets brings upward momentum to prices during the spring selling season be it an up-market or down.

Even a cursory glance at the charts below should result in the firm understanding that what we are experiencing today is unprecedented.

Thirty four months into the decline and the bottom to the home price slide is nowhere in sight.

The most optimistic argument one could make at the moment is that the pace of the decline is currently slower than it was a few months ago.

That should come as little comfort though considering that this decline will more than likely continue for another two to three years.

It’s important to consider that the 90s housing bust took roughly 50 months to reach the bottom in prices but as you can see from the charts below, our current housing bust literally dwarfs the 90s era tumult.

Further, 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).

In all likelihood, our current decline will play out at least as long as the 90s era (more than likely far longer) with a full recovery measured not in years but in decades.

The 10-city composite index declined 18.01% as compared to April 2008 while the 20-city composite declined 18.12% over the same period.

Topping the list of regional peak decliners were Phoenix at -54.07%, Las Vegas at -52.13%, Miami at -48.10%, San Francisco at -45.75%, Detroit at -44.97%, San Diego at -42.31%, Los Angeles at -41.82%, Tampa at -41.03%, Minneapolis at -36.52%, Washington DC at -33.37%, Chicago at -27.46%, Seattle at -22.50%, Atlanta at -22.80%, Seattle at -22.32%, Portland at -21.26%, New York at -21.08%, Cleveland at -20.58% and Boston at -19.73%.

Additionally, both of the broad composite indices showed significant declines slumping -33.56% for the 10-city national index and 32.61% for the 20-city national index on a peak comparison basis.

To better visualize the results use a Blytic.com search for "case shiller" or the PaperEconomy S&P/Case-Shiller/Futures Charting Tool as well as the PaperEconomy Home Value Calculator.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as compared to each metros respective price peak set between 2005 and 2007.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as on a year-over-year 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 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 (click for larger version).

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.

Looking at the actual index values normalized and compared from the respective peaks, you can see that we are still likely less than half of the way through the portion of the decline in which will be seen fairly significant annual declines (click the following chart for larger version).

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.