Case-Shiller Home Prices Show Modest Loss in August

More evidence of softening home prices is accumulating.  Case-Shiller home prices dropped slightly in August 2010.  The headline in part:

Data through August 2010, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show a deceleration in the annual growth rates in 17 of the 20 MSAs and the 10- and 20-City Composites in August compared to what was reported for July 2010. The 10-City Composite was up 2.6% and the 20-City Composite was up 1.7% from their levels in August 2009. Home prices decreased in 15 of the 20 MSAs and both Composites in August from their July levels.

The chart above depicts the annual returns of the 10-City and 20-City Composite Home Price Indices with increases of 2.6% and 1.7%, respectively, in August 2010 compared to the same month in 2009. In August, 12 of the 20 MSAs posted negative annual growth rates.

Econintersect uses the unadjusted 20 city composite data in its analysis. 

Econintersect believes we are headed for another leg down in housing prices.  It is interesting, when comparing to the National Association of Realtor’s (NAR) data – that the NAR data rose slightly in August, while the Case-Shiller Data fell.

Case-Shiller only uses home sales in its analysis where previous home sales data is available.  The NAR uses all home sales in its analysis.  Econintersect believes both methodologies are acceptable.  It is necessary to recognize the noise factors in these numbers, however.  Case-Shiller is reported as a 3-month moving average and the NAR data is reported as single month data.  The first thing needed before the two data sets are compared is to calculate the 3-month moving average for the NAR existing home sales.  This was done for the third graph above.

There are others tracking home prices.  One of the most current is provided as of the middle of October by Clear Capital.  Their data is displayed in a graph by 5 Min. Forecast:

The graph was produced before the Case-Shiller August data was released today, so the August decline in the blue line is not shown.  It is interesting to note that the Clear Capital price data was still rising slightly through the middle of August before showing a sharp decline in the past two months.

Another report on home prices is put out monthly by Altos Research.  Their 10-city market report has shown price declines in each of the three months of the third quarter.  The total average price change for July, August and September was -2.6%.  Altos has shown a softening of prices in their sample set starting 1-2 months before the other results quoted here.

A consistent picture of softening home prices is developing.  This is coming before the customary “prime selling season” for homes has ended and in front of a potential slowdown in sales coming from title questions arising from the The Mortgage Mess reviewed by Yves Smith.  And demand for housing is near an all time low and will have trouble improving as long as employment remains depressed.

Zip Realty‘s third quarter housing report is out this week.  It identifies the hottest and coldest real estate markets:

The report elicited the following lead statement in a RealtyMag article (entitled “Home Prices Stabilizing in Key Markets”): 

ZipRealty says in its third quarter report that homes in key markets all over the country are selling above the asking price.

RealtyMag is an official publication of the NAR (National Association of Realtors).  This organization continues to spin news in a way that harms their credibility.  Apparently the neighborhoods with 3% to 8% sales above asking prices are much more important than the neighborhoods with 13% tom 19% haircuts off asking prices.

Taking a closer look at the data in the Zip Realty report is quite revealing.  Zip tabulates offered and sold prices in individual neighborhoods for 33 of the top 35 metropolitan markets.  They have reported the data from the top five and bottom five neighborhoods in each market.  Thus, there are 330 data points.  These divide in to interesting packets, as shown in the following graphic:


It is seen that 25 of 165 top neighborhoods (15%) saw sales command a premium over asking price of 2% or more.  The maximum premium was 8.7% for Chicago’s Greater Grand Crossing neighborhood.  The next best premium was Oakland (CA) zip 94603.  Out of the other 23, 22 are between 2% and less than 5% premiums.

On the down side 82% took a haircut of 5% or more off the asking price and 38% received 10% or more less than asking price.  The NAR spin that “homes all over the country are selling above asking price” is a true statement that is extremely misleading.

The Zip Realty data clearly indicates that there is still market pressure on home prices. 

Other Related Articles

NAR Existing Home Prices Begin Anticipated Decline  by Steven Hansen

Another View of Housing Price Trends  by Ted Kadavas.

What Does a Foreclosure Moratorium Mean for the Housing Market?  by John Lounsbury