Tuesday, February 23, 2010

S&P/Case-Shiller: December 2009

Today’s release of the S&P/Case-Shiller (CSI) home price indices for December 2009 reported that the non-seasonally adjusted Composite-10 price index declined slightly since November further indicating that the government sponsored housing bounce has drawn to a close.

It’s important to remember that the CSI data is lagged by two months and that today’s results represent the trend of prices paid from home sales closed between October-December of 2009.

Now that the strongest selling months have been reported, look for all remaining CSI releases until early spring to continue to indicate notable price weakness coming from typical seasonal declines as well as extra-seasonal declines as a result of reduced demand from activity that was “stimulated” forward into the summer and early fall by the tax sham.

Also, looking at the 1990s-era comparison charts below its obvious that even after the main downward thrust has been reached, the housing markets have a long tough slog ahead with the ultimate bottom likely many years out…. Or if we are currently experiencing the Japanese model… decades out.

Further, is important to remember that 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).

Today, we may not be so lucky.

The 10-city composite index declined 2.41% as compared to December 2008 while the 20-city composite declined 3.08% over the same period.

Topping the list of regional peak decliners was Las Vegas at -55.54%, Phoenix at -50.52%, Miami at -47.07%, Detroit at -42.87% and Tampa at -41.67%.

Additionally, both of the broad composite indices show significant peak declines slumping -30.10% for the 10-city national index and -29.35% for the 20-city national index on a peak comparison basis.

To better visualize today’s results use Blytic.com and search for “case shiller”.

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.

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 month-to-month 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.

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.

1 comment:

  1. Anonymous4:19 PM

    Uttered by SATT after the April 2009 case shiller results:

    "The deceleration is just temporary and it is seasonal... yes S&P has seasonally adjusted series but seasonal adjustment isn't a perfect science.

    You can see in my "More Pain Less Gain" post yesterday that the markets that have typically strong seasonal patterns are bouncing as sales increase so for most markets the price slide will decelerate and for some prices will rise.

    BUT.. as my post points out... we are headed into another even larger leg of the storm... prime foreclosures are going to surge from here on out so there is plenty of decline left to go.

    You sound very confident of the price slide reaching a "halfway point"... how are you arriving at that?

    I wasn't aware of this "halfway point" ... what do you base that on?

    Is this a standard market clearing term?

    You get to the "halfway point" and then the remainder of the clearing process if a foregone conclusion?

    That appears to me to be very deterministic thinking... and likely a very wrong hunch on your part."