The Daily 2¢ - Jumbo Mortgage Avalanche

The times they are a changin’… and FAST TOO!

One week the Bulls are celebrating the “Goldilocks Economy” and DOW 14000 the next, a worried crisis-laden Larry Kudlow is stammering kookily about some crazy idea that the Federal Reserve should be buying up all the subprime and jumbo mortgages in order to prevent financial collapse… and in front of Robert Shiller no less!

Among the tumult surrounding Countrywide Financial and other mortgage lenders, yesterday’s business media was peppered with a slightly new and possibly more significant source of trouble for the nation’s housing markets, particularly for the hyper-inflated ultra-bubbly metro areas.

The availability of “Jumbo” mortgages, i.e. mortgages that exceeded the current OFHEO limit for Freddie Mac and Fannie Mae conforming loan status (currently $417,000 for a single family home), have essentially ground to a halt.

I say essentially because you can still get a Jumbo loan provided you give full documentation of your income (tax returns, pay stubs etc.), put down 20% on the purchase and are willing and able to finance the remaining principle at an over 7% interest rate.

Use Bankrate.com now and see for yourself… fixed rate, ARM, Interest Only… it doesn’t matter they are virtually all over 7% and almost non-existent if you’re not putting down 20%.

This is a kiss of death for the bubble-metro areas where home prices, even for the most modest starter homes, are still ridiculously inflated after having been pumped up by years of a loose lending induced buying mania.

The availability of cheap Jumbo’s is absolutely necessary for these areas to maintain any volume and fluidity of home sales, now they are gone and the first signs of the impact should be seen in the home sales statistics compiled during the next several months.

We have definitely reached another major turning point in the housing meltdown story as this will likely be the start of the most significant period of downward price adjustment in this cycle.

But wont things just snap back if the Fed cuts rates?

Not in my estimate.

To use an analogy, the mortgage meltdown is like an avalanche.

Friction exceeded its critical limit and the whole of the market has come crashing down the mountain.

Some lenders were instantly killed as pieces of debris crashed through their midsections; others are buried out of sight deep within the pile and, struggle as they might, will simply suffocate before they are able to resurface.

Still others are stuck in various ways but will go so far as to gnaw off arms and legs and stumble, bloody and hemorrhaging down to safety and a possible handicapped recovery.

A lucky few are simply trapped in shallow caves whereby, through a lot of digging, they will eventually free themselves, relatively unscathed but still bruised and shaken.

All the dead and survivors will share one thing in common though… none will be returning up the hill for some time to come.

P.S. I thought I might use another natural disaster analogy but with the earthquake in Lima Peru, a Tsunami threat in the Pacific, Hurricane Flossie hitting Hawaii, and tropical storms Erin in the Gulf and Dean in the Caribbean, I thought it might be in better taste to choose the avalanche!

New Residential Construction Report: July 2007

Today’s New Residential Construction Report continues to indicate horrendous weakness in the nation’s housing markets and for residential construction showing substantial declines on a year-over-year basis to single family permits both nationally and across every region.

Single family housing permits, the reports most leading of indicators, again suggests extensive weakness in future construction activity dropping 24.0% nationally as compared to July 2006.

Moreover, every region showed high double digit declines to permits with the West declining 20.4%, the South declining 27.8%, the Midwest declining 22.3% and the Northeast declining 11.3%.

Keep in mind that these declines are coming on the back of last year’s record declines.

To illustrate the extent to which permits and starts have declined, I have created the following charts (click for larger versions) that show the percentage changes of the current values compared to the peak years of 2004 and 2005.

Notice that on each chart the line is essentially combining the year-over-year changes seen in 2005 and 2006 and shows virtually every measure trending down precipitously.

Although year-over-year declines to permits, for example, have not accelerated measurably from September 2006, the fact that they continue to decline roughly 20%-30% should provide a solid indication that they are by no means stabilizing.




Remember that permits, starts, and competitions are not simply independent measures but are, in fact, three logically related and dependent measures.

In the process of a building project, first you get the “permit”, next you “start” building, and finally you “complete” the project.

For this reason, one must adjust expectations prior to reading a newly released Census Department report to account for the true nature of the data published simultaneously each month.

As in past months, I have “smoothed” (see last post for full details on smoothing process) out the unadjusted data and aligned the three data series (i.e. moved starts ahead a month and completions ahead six months) to make more obvious their trend.

Here are the statistics outlined in today’s report:

Housing Permits

Nationally

• Single family housing permits down 1.6% from June, down 24.0% as compared to July 2006

Regionally

• For the Northeast, single family housing down 1.1% from June, down 11.3% as compared to July 2006.
• For the West, single family housing permits down 1.6% from June, down 20.4% as compared to July 2006.
• For the Midwest, single family housing permits down 7.5% from June, down 22.3% as compared to July 2006.
• For the South, single family housing permits up 0.4% from June, down 27.8% compared to July 2006.

Housing Starts

Nationally

• Single family housing starts down 7.3% from June, down 25.4% as compared to July 2006.

Regionally

• For the Northeast, single family housing starts down 12.0% from June, down 7.8% as compared to July 2006.
• For the West, single family housing starts down 6.4 from June, down 21.2% as compared to July 2006.
• For the Midwest, single family housing starts down 9.2% from June, down 25.8% as compared to July 2006.
• For the South, single family housing starts down 6.2% from June, down 29.5% as compared to July 2006.

Housing Completions

Nationally

• Single family housing completions down 4.0% from June, down 27.7% as compared to July 2006.

Regionally

• For the Northeast, single family housing completions down 29.3% from June, down 38.3% as compared to July 2006.
• For the West, single family housing completions up 5.6% from June, down 19.4% as compared to July 2006.
• For the Midwest, single family housing completions down 14.7% from June, down 44.9% as compared to July 2006.
• For the South, single family housing completions down 0.5% from June, down 23.5% as compared to July 2006.

Keep in mind that this particular report does NOT factor in the cancellations that have been widely reported to be occurring in new construction.

Countrywide Bankruptcy?

Hmmm… I Wonder what happened to Mozilo, Sambol and Sieracki’s “top-conditioned athlete”?

Today, Merrill Lynch managed to finally downgrade Countrywide Financial (NYSE:CFC) to a “sell” from their recent “buy” stance adding an additional little tidbit that “it is possible for CFC to go bankrupt”.

Great! Thanks… A “Buy” one day, “Sell” it may go bankrupt the next!

Superb Work… I love Wall Street.

On a serious note, you have to wonder how the leadership at Countrywide could have felt so certain of the fundamental strength of their business that they not only suggested that they would survive the downturn but, in fact, stated that the company would actually “benefit” from the inevitable industry consolidation that would ensue from market turmoil.

Were they simply inexperienced, unable to see the true nature of the historic housing run-up and inevitable proportionate bust and prepare the company adequately for possible systemic risk OR was something else afoot?

In any event, yesterday Countrywide released their July Operational Results showing again that delinquencies and foreclosures are continuing to rise with delinquencies jumping 64.58% and foreclosures soaring 126.09% since July of 2006.

Prior to January 2007, Countrywide reported foreclosure data as a percentage of the total number of loans serviced which obviously lacked complete clarity.

Below, are charts of both measures; foreclosures by total number of loans serviced and foreclosures by percentage of unpaid loan principle (Click for larger versions).

Either way you slice it, Countrywide is looking at some significant increases in foreclosure activity but notice that for the “unpaid loan principle” method, things are really looking dire.

Be sure to check out the Countrywide Financial Foreclosures (REO) Blog’s Inventory Tracker for some more startling evidence that foreclosures are skyrocketing over at Countrywide Financial as well as some excellent REO tracking features.

Homebuilder Blues: NAHB/Wells Fargo Home Builder Ratings August 2007

Today, the National Association of Home Builders (NAHB) released their Housing Market Index (HMI) showing additional evidence that the new home market is experiencing a new leg down in declines.

The release came along with what the country’s bubbliest and overly inflated housing markets should considered a significantly alarming perspective from Chief Economist David Seiders.

“There is no question that problems in the subprime mortgage sector have spilled over to other components of housing finance, including the Alt.-A and jumbo markets, delaying a revival of the single-family housing market,”

Measuring builder confidence across six key data points, the builder survey has been a bellwether for the new home market since 1985.

The component measures used to formulate the overall HMI are respondent ratings on “present conditions”, “future conditions” and “buyer traffic” all of which continue to indicating significant current and future weakness as the new home market slumps its way slowly forward, now long separated from an exceptionally disappointing spring selling season.

In fact, July’s “present”, “future” and “buyer traffic” condition results have moved even nearer to the worst levels seen since early 1991 when the nation’s housing market was slumping through its last major housing bust.

The following charts show “present conditions”, “future conditions” and “buyer traffic” both smoothed since 1986 and unadjusted since 2005 (click for larger versions).

Keep in mind that for each measure respondents are asked to assign both a “good” and “poor” rating so in each chart you will notice “good” slumping while “poor” is surging.

The Daily 2¢

Is the fact that Ben Bernanke and others at the Federal Reserve consistently underestimated (and continue to underestimate) the impact of the housing collapse and mortgage crisis an indication that they hold a bullish bias against the possibility of impending calamity or simply a result of being caught between a “rock and a hard plate” in terms of public statements?

I, for one, think it’s the former and specifically NOT a little bit of both.

Clearly, the Fed is very careful in formulating public statements in an effort to put forward useful information without overly roiling the markets but I think had Bernanke held a more realistic view of the obvious outcome of the housing bust, he could have easily prepared expectations well in advance of the current meltdown we are now experiencing.

I’m certainly not suggesting that the role of the Fed Chair is to speculate far in advance of every possible impending crisis and attempt to engineer a sort of “wakeup call” to the markets but in the case of the Great Housing Bubble, I think his several, now incorrect, attempts to suggest a bottom had been reached was far worse.

For all its “smart money” bravado and perceived ivory tower-Ivy League expertise, I think many in Wall Street are naïve and have clung to the Feds mildly optimistic bias like a lifeline since the start of the housing decline.

Just listen to the hapless trader in this CNBC segment heap accolades on Bernanke for the liquidity injections, an action that should have been a surprise to no one.

Bernanke is simply following the game plan the Fed has had in place for decades… in fact, one in which he himself outlined in great detail in a 2003 speech on asset bubbles and monetary policy.

Too bad he may have squandered an opportunity to help instill in the markets a measure of reasonable caution well in advance of the now unequivocal crisis.

Reading Rates: MBA Application Survey – August 15 2007

The Mortgage Bankers Association (MBA) publishes a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as application volume for both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage increasing marginally since last week and now stands at the near peak for the year at 6.45% while the purchase volume increased 3.9% and the refinance volume increased 2.6% compared to last weeks results.

It’s important to note that the data is reported (and charted) weekly and that the rate data represents average interest rates, and the index data represents mortgage loan application volume for home purchases, home refinances and a composite of all loans.

The following chart shows how the principle and interest cost and estimated annual income required to cover the PITI (using the 29% “rule of thumb”) on a $400,000 loan has changed since January 2007.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages over the last number of weeks (click for larger version).

The following charts show the Purchase Index, Refinance Index and Market Composite Index since January 2007 (click for larger versions).

The Daily 2¢

One interesting outcome of the continued and persistent deterioration of the nation’s housing and mortgage markets is the eroding confidence of many formerly bullish “experts” and pundits.

Some at this point, particularly the honest ones, have been able to express some marginal skepticism about the likeliness that the economy will be able to transcend the current housing dilemma unscathed.

Others, at the very least, have acknowledged that the housing story is bigger than originally anticipated.

Then there are the likes of Ben Stein.

In Sunday’s New York Times, Stein shows again that he is ready to exploit the narrowest of “reasoned” arguments in preparation of what I would consider unabashed and likely untrustworthy bullish optimism.

The truth is, the housing story has been “consistently” bigger than folks like Stein have anticipated and yet they continue to deride anyone who sees tough times ahead as “Chicken Little’s”.

Am I alone in thinking that Ben Stein’s best work occurred during episodes of “The Wonder Years” and “Rugrats”?

UPDATE: Watch the ludicrous Ben Stein actually suggest that there are NO actual losses from the subprime meltdown on BNN now!

Conspicuous Correlation: July 2007

Today, the Commerce Department released their monthly Retail Sales Report for July which continued to show an interesting correlation between declining consumer spending, particularly on discretionary items, and the decline in home values.

As in past months, I have isolated the primary discretionary retail sales categories into a single “discretionary” retail sales series, and then charted the year-over-year percentage changes since 2000.

I then added the year-over-year percentage changes of the S&P/Case-Shiller Composite index which broadly and accurately tracks single family home prices using data from Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, and Washington DC.

The result is a significant correlation between the deceleration, and now outright decline, of home prices and a deceleration and subsequent decline in discretionary consumer spending.

The first chart (click for larger version) shows the complete discretionary series comparison from January 2000 to the latest reported months of 2007.

Note the precipitous deceleration and decline to home prices starting in January 2006 and the very well correlated decline in “discretionary” retail sales.

Also note that the latest decline to retail sales is easily the most significant and sustained seen since 2000, handily surpassing the decline that occurred during and preceding the 2001 recession.

The second chart (click for larger version) simply isolates the results from January 2006 in order to provide a clearer view.

NARcasting The Future: August 2007

Last week, the National Association of Realtors (NAR) released yet another downward revision to their outlook for existing home sales for 2007 along with another dose of truly ridiculous spin.

In an effort to put their absurd bias into perspective I compiled all their forecasts for 2007 home sales into a chart along with a list of prominent quotes supplied with each forecast.


12/11/2006 - Prediction: 6.40 million units
Lereah "Most of the correction in home prices is behind us."

1/10/2007 - Prediction: 6.42 million units
Lereah "The good news is that the steady improvement in sales will support price appreciation moving forward."

2/7/2007 - Prediction: 6.44 million units
Lereah "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008."

3/13/2007 Prediction: 6.42 million units
Lereah "Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next."

4/11/2007 Prediction: 6.34 million units
Lereah "Tighter lending standards will dampen home sales a bit, but by less than a couple of percentage points from initial projections."

4/30/2007
Lereah Leaves NAR for Move.com

5/9/2007 Prediction: 6.29 million units
Yun "Housing activity this year will be somewhat lower than in earlier forecasts."

6/6/2007 Prediction: 6.18 million units
Yun "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year."

7/11/2007 Prediction: 6.11 million units
Yun "Home prices are expected to recover in 2008 with existing-home sales picking up late this year."

8/8/2007 Prediction: 6.04 million units
Yun “With the population growing, the demand for homes isn’t going away – it’s just being delayed.”

Constructing Capitulation: June 2007

Looking back at June’s results (released in July) it safe to say that the weakening demand and an ongoing mortgage credit crisis are continuing to weigh heavily on the nation’s housing markets, sending them spiraling down yet another leg in this unprecedented housing decline.

The advance GDP Report for Q2 2007 continued to show a significant drag coming from the decline in residential fixed investment as well as significant revisions to past GDP results better demonstrating the pronounced effects this drag has had for the last four quarters.

The following chart shows real residential and non-residential fixed investment versus overall GDP since Q1 2003 (click for larger version).

The housing weakness also appears to clearly show up in retail sales as consumers pullback on spending for some of the most discretionary of goods.



The National Association of Realtors (NAR) released their fifth consecutive downward revision to their annual home sales forecast for 2007 putting the current outlook far below the “rose colored” initial predictions from the start of the year.

Homebuilder confidence continues to decline to near multi-decade lows with respondents indicating that estimates of “present” and “future” conditions as well as buyer traffic continues to slump.

The Census Department’s New Residential Construction Report which continued to indicate significant weakness in the nation’s housing markets and for residential construction showing substantial declines on a year-over-year basis to single family permits both nationally and across every region.

The Census Department’s New Residential Home Sales Report that, renewed declines, even accelerating in some regions, as well as significant downward revisions to last month’s results.

As with prior months, on a year-over-year basis sales are still declining in the double digits at 22.27% below the sales activity seen in June 2006.

NAR’s Existing Home Sales Report showing additional confirmation that the nation’s housing markets are continuing to experience weakness with EVERY regions showing considerable declines to sales as well as continued increases to inventory and monthly supply.

The May 2007 results of the S&P/Case-Shiller Indices are continued to show weakness for the nation’s housing markets with 15 of the 20 metro areas tracked reporting significant declines.

Topping the list of decliners on a year-over-year basis was Detroit at -11.06%, San Diego at -6.96%, Tampa at -6.67%, Washington DC at -6.34%, Phoenix at -5.55, Boston at -4.29% and Las Vegas at -4.10%.

Furthermore, comparing the last major downturn in the late 80s and early 90s to the current data may indicate that the current housing downturn is in its infancy with year-over-year declines only just having materialized in the last eleven months.


June's Pending Home Sales Report for June 2007 showing a continuation of the historic decline to residential housing on a month-to-month and year-over-year basis, both nationally and in every region.

The Census Department’s Construction Spending Report for June again demonstrated the significant extent to which private residential construction spending is contracting.

With the weakening trend continuing, total residential construction spending fell -16.39% as compared to June 2006 while private single family construction spending declined by a grotesque -25.82%.

Key Report Details:

• The seasonally adjusted annul rate of private residential construction spending has now dropped 21.80% from the peak set back in February 2006.
• Overall private residential construction spending dropped -16.39% as compared to June 2006.
• Single Family residential construction spending dropped 25.82% as compared to June 2006.

The following charts show changes to construction spending (click for larger version):

Pending Decline: June 2007 Pending Home Sales Report

Last week, the National Association of Realtors (NAR) released their Pending Home Sales Report for June 2007 showing a continuation of the historic decline to residential housing on a year-over-year basis, both nationally and in every region.

Additionally, the Northeast and Midwest regions have fallen back below 100 indicating that, seasonally adjusted, June’s home sales activity was BELOW the average activity recorded in 2001, the first year Pending Home Sales were tracked.

As usual, NARs Chief Economist, Laurence Yun takes a clumsy crack at false optimism insinuating that a bottom in declining demand may have already been reached and possibly even past.

“However, it is too early to say if home sales have already passed bottom, … Still, major declines in home sales are likely to have occurred already and further declines, if any, are likely to be modest given the accumulating pent-up demand.”

The following chart shows the national Pending Homes Sales Index since 2005 compared monthly. Notice that each year, the months value is decreasing consistently (click for larger version).

The following chart shows the year-over-year changes to the national Pending Home Sales index as well as comparing the latest results against the values seen in the peak year of 2005 (click for larger version).

The following chart shows the pending home sales index nationally and for each region tracked (click for larger version).

Note that in the above charts, I had to use the Not Seasonally Adjusted (NSA) data series as NAR changed the methodology for their Seasonally Adjusted (SA) series a while back and never republished the numbers. This is why none of the data appears to be breaking below a value of 100 because it’s the SA series that is now below 100.

Keep in mind the current pending sales decline comes ON TOP of last years historic fall-off so the continued weakness is a sure sign that the decline is not ephemeral.

Look at the June seasonally adjusted pending home sales results and draw your own conclusion:

• Nationally the index was down 8.6% as compared to June 2006.
• The Northeast region was down 2.4% as compared to June 2006.
• The West region was down 5.5% as compared to June 2006.
• The Midwest region was down 8.2% as compared to June 2006.
• The South region was down 12.7% as compared to June 2006.

So it appears that, year-over-year, contract activity is still dropping rather sharply with ALL regions continuing to show significant declines.

I’m Back!

First, many thanks to all the wonderful readers that wished me a happy vacation… It was really nice to come home to so many great emails!

Well, Bermuda was really amazing. I would definitely recommend it to anyone looking for a fun, beautiful, quiet and relaxing island destination.

It has stunning beaches and coves (pink sands on the south beaches!), exceedingly nice people, loads of fish to snorkel at and plenty of great points of interest and activities.

We even rented a small Boston Whaler and spent half a day shooting to-and-fro across the Great and Little Sounds and to the back side of the island around Spanish Point.

We were literally whizzing in-between the island ferries and alongside cruise ships! They are VERY laid back on that island to say the least.

Also, with Jet Blue now flying there it’s MUCH cheaper to get to than it had been in the past… Just $200 round trip from Boston (and likely other cities as well).

Better yet, it’s such a short flight… only 2 hours from many cities on the east coast and the Bermuda International Airport is extremely easy to get in and out of. It’s so quick and easy that your arrival and departure days almost become full days on the island.

On the way home I found myself plotting out just how and when to get back there again in the near future.

As for the housing and economic events that have transpired since I left all I can say is WOW!

Is there any doubt now that Great Decline is in full swing?

Is there any doubt that Bernanke and the Fed, Paulson and Lazear, and all the Bullish pundits, either purposefully or not, underestimated the depth and breadth of the housing collapse and the spillover effects it’s having on the general economy?

It seems clear to me that, at this point, Bernanke, not Yun, is the new Lereah and that no amount optimistic speak of the health of the overall economy, false notions of “containment” or even massive injections of liquidity is going to spin the tide against this colossal bust.

The mortgage market is imploding, homes sales are continuing to slide, inventory is rising and prices are falling.

Most American consumers are tightening their “discretionary” belts and many are losing their homes to foreclosure.

The only question now is how long will it take for this ugly deterioration to completely unfold and lead to recession and a reversion to the mean for home prices?

As we can see from last week, the collapse is quickly becoming one of the biggest stories of our time… far larger, I think, than all the bubble hype that ginned up the mania to begin with.

We are still at the start of this immense process and as it becomes clearer and more obvious to the average American that the glory days of the run-up are long gone, I expect to see the real correction kick in.

On Vacation!

I’ll be away on vacation for the next week so I thought I would take this opportunity to recommend a few of the excellent blogs on the blogroll that you can read in order to stay completely current on the housing decline.

Don’t forget, while I’m away the Inventory Tracking Tool, S&P/Case-Shiller/Futures Tool, OFHEO HPI Tool, and Bubble Times are always running and up to date so check them daily.

Also, although BNN - The Bubble News Network will have no new videos added until I return, there is now OVER 300 bubbly clips posted up there... So Watch Away!

For up-to-date blogging on housing and lending, as well as interesting analysis and charts of the Countrywide Financial REO inventory check out the Countrywide Foreclosures Blog.

For an exceedingly interesting perspective on the US economy including complete coverage of the housing fiasco read Immobilienblasen.

For BNN-style video-blogging there is both the Real Estate Video Blog and the New York City Housing Blog with daily video posts of all things bubbly.

For S&P/Case-Shiller and OFHEO charts as well as a host of other really impressive charts check out Housing Bubble Bust.

For Bubble Times-esc and Digg-styled Housing Bubble news you can turn to Housing Bubble News Central and Speculative Bubble.

For the best in regional coverage of the housing and mortgage meltdown read any of the blogs in the US Regional Section of my blogroll particularly:

• Boston Bubble
• Sacramento Landing
• The Marin Real Estate Blog
• The New Jersey Real Estate Report
• The Second City Bubble blog
• The Chicago Bubble Blog

Happy bubble reading and be sure to check back to PaperMoney as I’ll be sure to be blogging away as soon as I return.

S&P/Case-Shiller: May 2007

Yesterday’s release of the S&P/Case-Shiller home price indices for May continued to show weakness for the nation’s housing markets with 15 of the 20 metro areas tracked reporting significant declines.

Topping the list of decliners on a year-over-year basis was Detroit at -11.06%, San Diego at -6.96%, Tampa at -6.67, Washington DC at -6.34%, Phoenix at -5.55, Boston at -4.29% and Las Vegas at -4.10%.

Additionally, both of the broad composite indices showed accelerating declines slumping -3.38% for the 10 city national index and -2.83% for the 20 city national index continuing the first negative slump in annualized appreciation seen since the early 90’s housing bust.

To better visualize the results use the PaperMoney S&P/Case-Shiller/Futures Charting Tool and be sure to read the Tutorial in order to best understand how best to utilize the tool.

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 how young the current housing decline is, having only posted five consecutive year-over-year (YOY) monthly declines to home prices.

Looking at the actual index values normalized and compared from the respective peaks, you can see that we are only twelve months into a decline that, last cycle, lasted for roughly fifty four months during the last cycle (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.

Notice that peak declines have been FAR more significant to date and, keeping in mind that our current run-up was many times more magnificent than the 80s-90s run-up, it is not inconceivable that current decline will run deeper and last longer.