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Home Prices Continue Downward Trend

Econintersect is using the Case-Shiller data release as an occassion to overview the home price situation covering all data released through 29 March 2011.  Generally, all home price indexes are trending down.  Econintersect’s review begins with the  Case-Shiller’s press release:

Data through January 2011, released today by Standard & Poor’s for its S&P / Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show further deceleration in the annual growth rates in 13 of the 20 MSAs and the 10- and 20-City Composites compared to the December 2010 report. The 10-City Composite was down 2.0% and the 20-City Composite fell 3.1% from their January 2010 levels. San Diego and Washington D.C. were the only two markets to record positive year-over-year changes.  However, San Diego was up a scant 0.1%, while Washington DC posted a healthier +3.6% annual growth rate. The same 11 cities that had posted recent index level lows in December 2010, posted new lows in January.

The chart above depicts the annual returns of the 10-City and the 20-City Composite Home Price Indices.  In January 2011, the 10-City and 20-City Composites recorded annual returns of -2.0% and -3.1%, respectively. On a monthly basis, the 10-City Composite was down 0.9% and the 20-City Composite fell 1.0% in January versus December 2010. Only San Diego and Washington D.C. posted positive annual growth rates in January 2011. These are the only two cities whose annual rates remained positive throughout 2010. Every other MSA has either moved back into or has always been in negative territory during the recent housing crisis. On a monthly basis, Washington DC was the only market where home prices rose in January, but up only 0.1%. The remaining 19 MSAs and both Composites fell during the month, with 12 of the markets and the 20-City Composite down by at least 1.0% versus December 2010.

Case-Shiller in January indicated a slightly less home price decline then other indices, but all trend lines were in concert.

Econintersect sees a declining home price dynamic in play at least through 2011.  Here is a synopsis of the comments of the authors of the various indices:

Case-Shiller  sees the latest data as bearish for residential real estate:

 “Keeping with the trends set in late 2010, January brings us weakening home prices with no real hope in sight for the near future” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.  “With this month’s data, we find the same 11 MSAs posting new recent index lows. The 10-City and 20-City Composites continue to decline month-over-month and have posted monthly declines for six consecutive months now.  during the recent housing crisis. On a monthly basis, Washington DC was the only market where home prices rose in January, but up only 0.1%. The remaining 19 MSAs and both Composites fell during the month, with 12 of the markets and the 20-City Composite down by at least 1.0% versus December 2010.
“Keeping with the trends set in late 2010, January brings us weakening home prices with no real hope in sight for the near future” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.  “With this month’s data, we find the same 11 MSAs posting new recent index lows. The 10-City and 20-City Composites continue to decline month-over-month and have posted monthly declines for six consecutive months now.

CoreLogic- The January data shows home prices continuing to slide. Mark Fleming, chief economist with CoreLogic, said:

 “A number of factors continue to dampen any recovery in the housing market. Negative equity, which limits the mobility of homeowners, weak demand and the overhang of shadow inventory all continue to exert downward pressure on housing prices. We are looking out for renewed demand in the coming months as the spring buying season gets underway to hopefully reduce the downward pressure.”

 

NAR- Lawrence Yun NAR chief economist, expects an uneven recovery.

  “Housing affordability conditions have been at record levels and the economy has been improving, but home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers,” he said.  “This tug and pull is causing a gradual but uneven recovery.  Existing-home sales remain 26.4 percent above the cyclical low last July.”

Altos Research  - [Note: This discussion is for February data.]

During the month of February 2011, home prices continued their pattern of overall decline. However, week-over-week data indicate that this trend may soon change, as small increases are being seen on a national level. Prices, on the whole, were down by 2.01% last month, and down 3.44% over the last 90 days. And while the data over the three-month period show sharp declines in markets like San Francisco, Washington, DC and Detroit, the short-term information likely paints a more accurate picture of conditions moving into spring.

If Altos Research is correct, a seasonal improvement is underway to the unadjusted data Econintersect evaluates.  However, it is still believed the long term trend line will remain down due the the excess of housing from foreclosure and pent up need to sell.

Related Articles

Pending Home Sales Not Indicative Housing Recovery is Underway  by Steven Hansen

New Home Sales Continuing to Decline  by Steven Hansen

Existing Home Sales Are Not As Bad As NAR Suggests  by Steven Hansen

New Housing Permits Offer Strange Data  by Steven Hansen

Economic Data Points to Growing Profitability in Residential Builders  By John Lounsbury and Steven Hansen

CoreLogic Home Price Index Falls to New Low  by Steven Hansen

Housing Market Begins Its Spring Uptick  GEI News Brief

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