Home Price Fall For 8th Consecutive Month
No surprise here: The Case-Shiller Home Price Index fell yet again.
Through August 2007, prices of existing single family homes across the United States. The index of 10 U.S. cities fell 5% in August from a year ago -- the biggest drop since June 1991 (a decline of 6.3% in April 1991 holds the record). It is the 21st consecutive month of decelerating returns.
Here's Shiller on the details:
“At both the national and metro area levels, the fall in home prices is showing no real signs of a slowdown or turnaround,” says Robert J. Shiller, Chief Economist at MacroMarkets LLC. “Year-over-year and monthly price returns are continuing to either move deeper into negative territory or are experiencing persistent diminishing returns. There is really no positive news in today’s report, as most of the metro areas are showing declining or vanishing returns on both an annual and monthly basis. Only two metro areas – Denver and Detroit – showed improvement in their annual returns and even those were reports of slightly less negative numbers.”
Doesn't look quite like a bottom just yet.
Treasury Secretary Hank "Strong Dollar" Paulson has finally come around. After making several prior, premature calls for a Housing bottom, I give credit to Paulson, who has now clearly changed his tune:
"The figures reinforce the view among Federal Reserve officials and Treasury Secretary Henry Paulson that the housing slump has further to go. Near-record inventory levels suggest sellers will continue to lower prices, posing a threat to consumer spending because homeowners will have less equity to borrow against.
"This is really the No. 1 risk: a sustained, sharp decrease in home prices really squeezing consumers,'' said Meny Grauman, an economist at Scotia Capital Inc. in Toronto."
As Keynes stated, "When the facts change, I change my mind. What do you do, sir?"
Indeed . . .
>
Sources:
Further Weakening in Home Prices
S&P/Case-Shiller Home Price Indices
October 30, 2007
http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_102626.pdf
S&P/Case-Shiller Home Prices Fell 4.4% in August
Courtney Schlisserman
Bloomberg, Oct. 30
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRbwsKS_s_ZQ&
Tuesday, October 30, 2007 | 09:40 AM | Permalink
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Comments
"Strong Dollar" Henry and "Helicopter" Ben are screwed, but they only have themselves to blame. How much lower can they cut rates, in all seriousness? Even if they did, what effect would that have? Inflation would just increase at a faster clip. They have really put themselves in a pickle. Didn't Barry post about John Fogerty this past weekend? ;-)
Posted by: Joe Klein's conscience | Oct 30, 2007 10:06:53 AM
"Strong Dollar" Paulson has changed the mantra because now they can use this to justify endless rate cuts. Oh! not endless. they have to stop at zero and start B-52 Ben's aerial bombardment against the non-believers who won't shop because they can't meet house payments.
Posted by: zao | Oct 30, 2007 10:21:50 AM
We're in uncharted waters, the ship is listing, and we can't navigate without charts (even if we had charts, our rudder is out of the water and we can't steer the ship). 'How deep is the bottom?', is not the question. The question is, 'how well can you swim?'
Keep your eye on the captian and officers - they're going to try to steal the lifeboat and provisions.
Posted by: Marcus Aurelius | Oct 30, 2007 10:38:12 AM
Paulson either is stupid or knew damn well housing had not bottomed when he repeatedly said it had. For him, it is not a case of "When facts change, I change my mind". It is a case of "When my prior politically motivated attempt to gull people into thinking things were going well becomes completely untenable, I try to salvage my credibility by acknowledging reality." One hopes that his prior shilling for the administration did not actually convince anyone to buy or mortgage a home that is now worth less.
Posted by: TKL | Oct 30, 2007 10:57:43 AM
Giving credit to Paulson? Good Lord. The man is a politician. His words have been despicable since day one. Blowing smoke about a housing bottom when he knew better. Only now, when it is finally obvious to all, does he "change his tune." He is either the dullest Treasury Secretary ever, or he is incredibly insincere. I believe it is the latter. The man deserves zero credit.
Posted by: Mike M | Oct 30, 2007 10:59:11 AM
The only credit Paulsen deserves is being completely dishonest and talking from his lower regions at every available opp.
We are going to have a monumental problem of epic proportions if this "official" is allowed to continue to prop up the market for the sake of his handlers (chinese) and the GOP.
Without question the single biggest problem our financial system has today starts and ends with Hank Paulsen...let's not forget Bernancke although he will have his own private place in hell starting about January 2009 when his current "strategists" suddenly look up and realize that 01/20/09 is approaching fast. By then they will have looted, plundered and lowered rates all under the guise of "forstalling" the recession so that they will be able to blame it on whoever wins the election.
I love how the media portrays MER as the only broker to loose money during the third Q......Last time I checked a write down=a loss...but not if you are a "journalist".
Yet another bottom....gotta love it...
Ciao
MS
Posted by: michael schumacher | Oct 30, 2007 11:10:34 AM
Excuse me? The facts didn't change, they were ignored until it was evident that Hank/Ben were so wrong on the matter that the facts could be ignored no longer!
Posted by: W.Edwards | Oct 30, 2007 11:13:14 AM
I am reminded of the scene in "Titanic" after they hit the iceberg. The crew is kicking around the ice on the deck and they are talking about getting in to New York late.
Posted by: edhopper | Oct 30, 2007 11:13:36 AM
We live in interesting times!!!! We don't know if we should get out our sunglasses because the future is so bright or run for the bunker. I guess I'll just stand close to the bunker with my sunglasses on---lol
Posted by: gunthestops | Oct 30, 2007 11:35:40 AM
More of the deregulate, get the government off by back, free marketeer crowd suddenly want government help:
MOZILO, KB HOME CHIEF OFFER BLEAK FORECAST(AP) - The chief executives of Countrywide Financial Corp. and KB Home predicted more trouble ahead for the nation's slumping housing market on Monday, calling on lawmakers to expand financing for home buyers.
The remarks from Angelo Mozilo of Countrywide, the nation's largest mortgage lender, and Jeffrey Mezger of KB Home, one of the biggest homebuilders, came during a panel discussion hosted by the Milken Institute on the economic impact of the subprime mortgage meltdown.
"Falling values is what continues to be the problem here," said Mozilo, also Countrywide's chairman. "And as long as values keep on falling, the subprime situation will get worse and begin to spill into prime [loans]."
(Begin to spill into prime ???)
.
Posted by: VJ | Oct 30, 2007 11:37:18 AM
Anyone check the spreads on the CMBX indices lately? Over half are setting new highs, easily surpassing levels set in August. Same goes for the ABX indices setting new lows, yet CNBS talk is that we're nearing the end of the credit crunch. Disdain for mass financial media grows by the hour.
http://www.markit.com/information/products/cmbx.html
Posted by: Stuart | Oct 30, 2007 11:44:20 AM
Speaking of CFC... Government risk?
"U.S. Tosses Lifeline to Lenders Using Home Loan Banks
Oct. 30 (Bloomberg) -- Banks shut out of the market for short-term loans are finding salvation in a government lending program set up to revive housing during the Great Depression.
Countrywide Financial Corp., Washington Mutual Inc., Hudson City Bancorp Inc. and hundreds of other lenders borrowed a record $163 billion from the 12 Federal Home Loan Banks in August and September as interest rates on asset-backed commercial paper rose as high as 5.6 percent. The government-sponsored companies were able to make loans at about 4.9 percent, saving the private banks about $1 billion in annual interest..."
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_l2_kTFSFGU&refer=home
Posted by: Strasser | Oct 30, 2007 11:48:33 AM
yes the timing of all of "tangelo's" comments are usually applicable to 1). Him making yet another change in his stock sale plan. 2). The Fed just happens to be meeting as they were when he opened up his mouth about it last time.
How this guy is not in jail is beyond reproach...he just continues to go along and be a "victim" of his own failure to understand the business that has made him very rich.
But I guess it's just a coincidence that he has sold hand over fist for over a year.
Ciao
MS
Posted by: michael schumacher | Oct 30, 2007 12:03:43 PM
I was home sick yesterday and had Bloomberg on in the background. One of their guests was demanding 11 consecutive 25 bps cuts. I'm like, did you guys forget what got us in this mess in the first place? Suck it up.
Posted by: Florida | Oct 30, 2007 12:33:52 PM
And is anyone else but me getting a chuckle out of the fact that Mozillo and Mezger were speaking at the Milken Institute yesterday (from the article VJ linked)?
Posted by: Florida | Oct 30, 2007 12:46:59 PM
that little tidbit did'nt escape me as did the one about O'neal starting out in the junk-bond division of Merill.....in 1986 no less.
Stupid is stupid does.
Ciao
MS
Posted by: michael schumacher | Oct 30, 2007 12:50:50 PM
VJ:
Wasn't it CFC that said they see blue skies and profitiability in 4Q and on down the road? It seems his statements at the Milliken Institute are at odds with that.
Posted by: Joe Klein's conscience | Oct 30, 2007 12:58:50 PM
Eh gads, Tampa prices are falling by more than Detroit!!! Now that's news. Florida is toast.
Posted by: Fomerly known as... | Oct 30, 2007 1:11:08 PM
The HGX has just gone positive... must be time to back up the truck on homebuilders.
Posted by: Strasser | Oct 30, 2007 1:18:58 PM
Florida is right: rate cuts no way!
I'd go further by suggesting a 25 points rate HIKE. Just a one time trick but you don't say so. Just to signal to the market participants that moral hazard won't be tolerated anymore.
However, this scenario assume a Fed with cojones and spine, able to clearly tell to their political counterparts that they work for the good of the country, not for the elephant or the donkey, and if they ain't happy with that, they have the right to go to Hell. Volker did it: why can't Copter Ben try to emulate a real man, instead of Easy Al, the Great Invertebrate?
I'm definitely not holding my breath for that to happen, but one can always dream a bit no? :-D
Francois
Posted by: Frankie | Oct 30, 2007 1:29:19 PM
i don't get why falling housing prices effects anything. I mean, really, how often do people actually move? The only time your housing price matters is when you're selling.
A house isn't an investment, it's a place to sleep.
And rates should go up. Our problem right now is billions of bad loans. I fail to see how lower interest rates is going to help stop bad loans.
Posted by: pacified | Oct 30, 2007 1:37:26 PM
don't expect rate hike from dovish JumboJet Fed Ben. He is stock market pumper. He cuts rate to pump up market. Just look at repo, you know he will cut by 50bp again. don't place your bet according to wish.
Posted by: test | Oct 30, 2007 1:43:25 PM
So now we have former Treasury Secretary Rubin back in the picture as Bloomberg headlines read... "Rubin urges policy makers to re-establish fiscal discipline... says policy favoring weak dollar isn't 'sound approach'... much weaker dollar could boost inflation... lower exchange rate reduces U.S. living standards... goal should be 'strong currency based on sound policy'... "
O-kay... is this part of the 'Rubin Rule'
Posted by: Strasser | Oct 30, 2007 1:51:18 PM
"One of their guests was demanding 11 consecutive 25 bps cuts." and gutless Ben will cave in like last time. well I mean dovish and deflation fighter will excel his predecessor. Ben preemptively cut 50bp before the problem appear. he will do at least another 50bp cut. we should be prepared for consecutive cuts in the future, because Ben really want to make sure stock market continue to moon
Posted by: test | Oct 30, 2007 1:54:15 PM
And right on cue. GE "lays off" all of it's mortgage personnel.......ONE FULL DAY BEFORE the FED decision. I'm guessing Mr. Immelt was not part and privy to the many meetings that have taken place......secretively of course...
Ciao
MS
Posted by: michael schumacher | Oct 30, 2007 2:43:57 PM
