Case-Shiller: House Prices Fall Slower

The Case-Shiller housing numbers are out and are being spun as showing signs of improvement. That like beauty is in the eye of the beholder.

Here is Reuters report:

Prices of U.S. single-family homes fell in April from March but the pace of the decline moderated, suggesting stability is emerging in some regions, according to Standard & Poor’s/Case Shiller home price indexes released on Tuesday.

An index of 20 metropolitan areas dipped 0.6 percent in April from March, after a 2.2 percent decline the month before, for an 18.1 percent downturn from a year earlier.

The month’s slide was smaller than the 1.8 percent drop forecast in a Reuters poll.

S&P’s index of 10 metropolitan areas declined 0.7 percent in April for an 18 percent year-over-year drop, after falling 2.1 percent month on month in March.

The rate of annual decline in these measures has improved, from 18.7 percent for both indexes in March.

The old second derivative argument but you do have to stop getting worse before you can start getting better. However, here is a note of caution from the WSJ Real Time Economics Blog:

“It is important to understand that these indices are constructed using non-seasonally adjusted sales prices, and therefore when housing activity perks up seasonally in the spring and summer months, any effect on selling prices would not be adjusted out of these data,” said economist Joshua Shapiro at MFR, Inc. “In fact, in 2008, after dropping by an average of 2.4% per month in the first quarter, the composite 20 city index than registered average month-to-month declines of 0.9% during the prime spring and summer selling season before reaccelerating to post an average 2.2% monthly decline in the final four months of the year. We continue to believe that it is unlikely that we are near a bottom in nationwide home prices.”

There’s always someone around these days waiting to throw cold water in your face. For those who like to watch train wrecks here are the latest numbers for the index by city:

About the numbers: The Case Shiller indices have a base value of 100 in January 2000. So a current index value of 150 translates to a 50% appreciation rate since January 2000 for a typical home located within the metro market.

Take a look at the numbers for Phoenix, Atlanta, Detroit and Cleveland. Phoenix and Atlanta are approaching 100 or to put it another way, if you bought a typical home in either city in 2000 you barely made any money at all on a typical home. If you bought in Detroit and Cleveland, your house is worth less now than it was in 2000. Talk about lost decades!

About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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