Case-Shiller: Photofinish Shows Housing Almost In Double Dip Territory

While Case-Shiller home price index is only 0.0072% from its recession low point set in April 2009, all other major indices are already in double dip territory.   The headlines:

Data through February 2011, released today by S&P Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show prices for the 10-and 20-city composites are lower than a year ago but still slightly above their April 2009 bottom. The 10-City Composite fell 2.6% and the 20-City Composite was down 3.3% from February 2010 levels.  Washington D.C. was the only market to post a year-over-year gain with an annual growth rate of +2.7%.  Ten of the 11 cities that made new lows in January 2011 saw new lows again in February 2011. Detroit avoided another new low, managing a +1.0% increase in February over January, the only city with a positive monthly change. With an index level of 139.27, the 20-City Composite is virtually back to its April 2009 trough value (139.26); the 10-City Composite is 1.5% above its low.

The chart above depicts the annual returns of the 10-City and the 20-City Composite Home Price Indices. In February 2011, the 10-City and 20-City Composites recorded annual returns of -2.6% and -3.3%, respectively. On a month-over-month basis, the 10- and 20-City Composites were both down 1.1% in February versus January. San Diego, which had posted 15 consecutive months of positive annual rates ended its run with a -1.8% annual rate of change in February 2011. Washington DC has assumed that status, with 15 consecutive months of positive annual growth rates beginning in December 2009 through February 2011. Twelve of the 20 MSAs and both Composites fared worse in terms of annual growth rates in February compared to January. Atlanta, Cleveland, Dallas, Detroit, Phoenix, Portland (OR) and Washington D.C. saw improvements in their annual rates of return in February versus January; New York was unchanged.

Each of the indices use a different methodology in compiling their indexes – and no index is perfect.  In this case, however, all are demonstrating the same downward trend – and Case-Shiller is now showing the least decline.

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

Case-Shiller sees no real change in underlying dynamics.

“There is very little, if any, good news about housing. Prices continue to weaken, trends in sales and construction are disappointing.” says David M. Blitzer, Chairman of the Index Committee at S&P Indices.  “Ten of the 11 MSAs that recorded index lows in January fell further in February. The one exception, Detroit, is 30% below its 2000 price level. The 20-City Composite is within a hair’s breadth of a double dip. Fourteen MSAs and both Composites have continued to decline month-over-month for more than six
consecutive months as of February.

“Recent data on existing-home sales, housing starts, foreclosure activity and employment confirm that we are still in a slow recovery. Existing home sales and housing starts rose in March, but remain close to recent lows. Foreclosure activity showed decreases in mortgage delinquencies in the fourth quarter of 2010, but are still close to historic highs. The nation and 34 states registered a decline in their unemployment rates for March.”

CoreLogic is seeing a little light at the end of the tunnel.

Despite the continued overall decline, home prices excluding distressed properties are showing signs of stability according to Mark Fleming, chief economist with CoreLogic. “When you remove distressed properties from the equation, we’re seeing a significantly reduced pace of depreciation and greater stability in many markets. Price declines are increasingly isolated to the distressed segment of the market, mostly in the form of REO sales, as the stock of foreclosures is slowly cleared.” he said.

NAR is the industry cheerleaders and are always ready to pump the positives.

Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun explained.

“Given that FHA and VA government-backed loan programs turned a modest profit over to the U.S. Treasury last year, and have never required a taxpayer bailout, we believe low-downpayment loans should continue to be available for those consumers who have demonstrated financial responsibility and are willing to stay well within their budget. Raising the downpayment requirement would unnecessarily deny credit to many worthy middle-class families and veterans,” Yun said.

Altos Research, which offers real time analysis, sees the usual seasonal bounce coming.

In March 2011, while the majority of markets tracked by Altos posted decreases in home prices, this is a trend that seems to be reaching its conclusion. Quietly, increases have been seen in several markets across the country, in markets along the East Coast, in particular. On the whole, prices were down by 0.29% last month, which is a stark improvement over the national average of March 2011. San Jose, Phoenix, and Boston showed the biggest increases, but data are showing week-over-week gains across the country. It can be expected that the data will reflect these gains in the coming months. Even in areas like Atlanta, which posted the largest decrease in home prices, the declines were modest, at worst.

Both NAR and Altos Research real time data is showing the seasonal uptick in home sales and home prices.  The data Econintersect has seen to date is not showing an improvement over 12 months ago.  Uncertainty is not a friend of consumers making large purchases, and headline news over the next few months may well determine the course of this season’s home prices.

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