Case Shiller Housing Composite Flips Negative
For first time in over a decade, the Case Shiller Housing Composite flipped negative; I'm sure this is utterly meaningless, and is nothing to worry about whatsoever:
"January data released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices in the United States, shows home price composites plummeting into negative terrain.
“The annual declines in the composites are a good indicator of the dire state of the U.S. residential real estate market,” says Robert J. Shiller, Chief Economist at MacroMarkets LLC. “ The 10-City and 20-city Composites are both showing negative annual returns, a striking difference from the 15.1% and 14.7% returns they reported this time last year. The dismal growth in the 10-City composite is now at rates not seen since January 1994.”
S&P/Case-Shiller Home Price Indices
Unless the actual data matters to you, and you are uninterested in becoming a serial bottom caller in Housing.
But other than that, nothing to worry about here . . .
>
Source:
The New Year Begins With Negative Returns According To The S&P Case-Shiller Home Price Indices
Mar 27, 2007 09:00 AM EST PDF
http://www2.standardandpoors.com/spf/pdf/index/032707_homeprice.pdf
S&P/Case-Shiller Home Price Indices
S&P/Case-Shiller Home Price FAQ
Tuesday, March 27, 2007 | 11:30 AM | Permalink
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Comments
Serial bottom-caller for the housing market sounds like a good career path, with guaranteed employment for at least the next 10 years.
Posted by: jm | Mar 27, 2007 11:30:01 AM
I think people should forget about the bottom and think about the problems that have just begun...
Posted by: Lauriston | Mar 27, 2007 11:36:46 AM
This is going to get much, much worse before it goes positive again. In the grand scheme of things it's just getting started.
Posted by: Bob G. | Mar 27, 2007 11:37:46 AM
Please stop with the real estate whining. I don't understand since real estate is only 6% of the economy, this means little going into the future. What ends expansions is investment slumps.
This is the 3rd greatest investment boom of all time. Why not enjoy it and ignore disinformation specialists like "Shriller" or those Karl Polanyi wannabe hacks like Roubini(Wanna bet he carries "The Great Transformation" with him at all times?).
P Per Per Pert Pert Perts PERTS PERTS PERTS!!!!
Posted by: Lenny Perts | Mar 27, 2007 11:40:37 AM
Lenny,
Mortgage implosion + Capex Miracle Debacle = Investment Slump
Posted by: Polly Anna | Mar 27, 2007 11:45:01 AM
Seems to me, from the chart, that in about 12-24 months, it's going to be a very good buyers market... possible time to invest in RE for the long term recovery?
Posted by: Chad K | Mar 27, 2007 11:59:09 AM
Notice how infrequently the mainstream media reports that the "1% decline" is based solely on homes with "conforming mortgages". In California, that excludes anything bigger than a shoebox. I wonder what the real figure is, both with and without the fraud of adding the price of we-used-to-charge-for-this incentives to the purchase price.
Posted by: wunsacon | Mar 27, 2007 11:59:30 AM
I must have missed the post on the (more comprehensive) OFHEO data on March 1....
Posted by: Macro Man | Mar 27, 2007 12:09:42 PM
What's particularly interesting to me is how the steepness really mirrors 1990, and how the prices were generally dropping (albeit slowly) for five years after it first went negative.
I hereby call a bottom in housing. In 2012.
Posted by: Trent | Mar 27, 2007 12:12:23 PM
What a shock: after years of going straight up, home prices have stopped rising and are actually down in some markets. Here in Los Angeles, I figure prices are down 10% from the peak - which means they are back to where they were 12-18 months ago, which was double from 5 years ago. Maybe they'll fall another 10%, who knows. For anyone who's owned their house for over 2 years (and hasn't already extracted their equity in new debt), this "news" is pretty irrelevant. Unless it causes the Fed to whack rates, in which case I'll be able to refi on even better terms.....
Posted by: rouss | Mar 27, 2007 12:20:49 PM
Macro Man, How do you figure the OFHEO data is more comprehensive? The headline # includes refi's, the data set is restricted to loans that can be purchased by the GSE's (I think the limit is now around $400k). The CS data is repeat sales, which itself poses problems, but tough to say OFHEO is a better gauge.
Posted by: Ray | Mar 27, 2007 12:24:25 PM
To all RE agents out there. Get your clients to lower their damn prices!
O/W, I hope you lead this consumer driven slowdown with your non-existent commissions!
Posted by: Michael C. | Mar 27, 2007 12:36:53 PM
I need to stop watching CNBC although it has become funnier than the Comedy Channel. This morning they had on a guest who said thst the tightening of lending standards was going to save the housing market. It will help the economy in the long run by making loans to people that can actually repay them. However, it is going to be very painful in the short run.
Posted by: GerryL | Mar 27, 2007 12:38:18 PM
Agreed Gerry. That whole network has become a comedy routine.
I don't know how Barry can go on Kudlow's show.
Posted by: RN | Mar 27, 2007 12:49:31 PM
Check out the WEBCAST PRESENTATION in the righthand column...Stunning charts....
Posted by: SINGER | Mar 27, 2007 12:52:43 PM
Quite right... no significance. Pay no attention to the man behind the curtain...
Posted by: wally | Mar 27, 2007 1:02:14 PM
Oversold? Later this year might be a great time to get back in the RE market?
Posted by: ManhattanGuy | Mar 27, 2007 1:02:18 PM
Well, for one thing, Case-Schiller uses 10 and 20 city cohorts. That is an awfully narrow gauge for a country as large and diverse as the US, particularly when price trends and affordability have diverged so substantially by geographic region.
Posted by: Macro Man | Mar 27, 2007 1:29:32 PM
This plays in well with the Fed post earlier. The Fed is in a tight place between inflation and disinflation.
All signs are pointing to a slow down in the US and global economy. Increased tightening across the world, including those easy Central Banks like the Swiss and Japanese has reduced the flow of money. So the ability to sell your sucker assets at a higher price to a bigger sucker has become more difficult. With less money going around money is just rotated between assets at overpriced levels. Financial assets such as real estate, currencies and stocks lead the charge and inflate very easily. Consumables like raw materials and agriculture do not react as quickly and take some time to increase in price because consumers and producers are more resistant to bear the brunt of the prices increases. So the full effect of price inflation takes longer to get to the consumer.
The Fed is at the point in the cycle where lowering rates would help support prices in financial assets but it would not just result in their rebound but increases in some of those assets that have not been weighted on so heavily. It would also cause more pressure on consumable prices in the long term. So a short term save would produce long term consequences.
The Fed would like to weather this storm as long as they can. If they can go long enough to see price deflation n consumables their job will be done. In order to do so they need to acknowledge indicators showing slowing, so as not to loose credibility, but to show inflation is a major concern. Both canceling each other out the Fed can remain paused.
Posted by: anderl | Mar 27, 2007 1:41:24 PM
Just finished Schiller's book "Irrational Exuberance". Makes a pretty good case for housing continuing to decline over the next 5-10 years. Shoots holes in most RE bulls explanation for the housing run-up. I think his price index is about as accurate as your going to find. He had a lot of doubters back in March of 2000 when the first edition of his book was published calling for a sharp correction in equity prices. Good article in Barron's on Schiller this week.
Posted by: Will Geisdorf | Mar 27, 2007 1:54:52 PM
The first leg down in bear markets takes about 2 - 2 1/2 years. This first leg down in housing still has a bit more time to go. Then we should see a rebound, just like we did in the dollar and the stock market. Then many more years of pain to follow.
Posted by: Gary | Mar 27, 2007 1:55:07 PM
I would wait until 2008 before I even consider looking at housing as an investment. REITs could still do well in the residential sector because the demand for rentals will grow. Former homeowners who were foreclosed still need to live somewhere and will take many years to reestablish credit worthiness. Minimum wage in on the rise and landlords are attempting to capitalize on it.
Posted by: anderl | Mar 27, 2007 2:08:04 PM
I think it would be interesting, amusing, and enlightening to add up the amount of time, in any given day recently, that is dedicated to Housing, lending and the Subprime Slime.
Yackedy Yack, Blah blah blah....
I would venture a guess that it is up to ~25% of CNBC's coverage is housing related...get it??
Posted by: Fred | Mar 27, 2007 2:25:33 PM
As soon as I finished writing that post I knew I should have qualified with your point of geographic reach. My bad. Though it's not as if the CS series is only measuring those cities specifically, as they incorporate significant MSA's that surrond the headline city. More geographic reach by OFHEO? Yes. But how economically vital is the measure of lower population MSA's? I don't think OFHEO's reach alone gives one solace.
Posted by: Ray | Mar 27, 2007 2:27:18 PM
"Please stop with the real estate whining. I don't understand since real estate is only 6% of the economy, this means little going into the future. What ends expansions is investment slumps."
When we were going up and having a great time, it was the consumer tapping into their home's equity, fueling the economy etc. Now there are problems it becomes "only 6%" of economy. Time will tell and reveal all...
Posted by: Lauriston | Mar 27, 2007 2:43:37 PM
