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 . . .


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

S&P/Case-Shiller Home Price Indices

S&P/Case-Shiller Home Price FAQ

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What's been said:

Discussions found on the web:
  1. jm commented on Mar 27

    Serial bottom-caller for the housing market sounds like a good career path, with guaranteed employment for at least the next 10 years.

  2. Lauriston commented on Mar 27

    I think people should forget about the bottom and think about the problems that have just begun…

  3. Bob G. commented on Mar 27

    This is going to get much, much worse before it goes positive again. In the grand scheme of things it’s just getting started.

  4. Lenny Perts commented on Mar 27

    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!!!!

  5. Polly Anna commented on Mar 27


    Mortgage implosion + Capex Miracle Debacle = Investment Slump

  6. Chad K commented on Mar 27

    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?

  7. wunsacon commented on Mar 27

    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.

  8. Macro Man commented on Mar 27

    I must have missed the post on the (more comprehensive) OFHEO data on March 1….

  9. Trent commented on Mar 27

    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.

  10. rouss commented on Mar 27

    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…..

  11. Ray commented on Mar 27

    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.

  12. anothr user commented on Mar 27

    Anothr feed track -The Big Picture

    One new subscriber from Anothr Alerts:leeds.tyh

  13. Michael C. commented on Mar 27

    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!

  14. GerryL commented on Mar 27

    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.

  15. RN commented on Mar 27

    Agreed Gerry. That whole network has become a comedy routine.

    I don’t know how Barry can go on Kudlow’s show.

  16. SINGER commented on Mar 27

    Check out the WEBCAST PRESENTATION in the righthand column…Stunning charts….

  17. wally commented on Mar 27

    Quite right… no significance. Pay no attention to the man behind the curtain…

  18. ManhattanGuy commented on Mar 27

    Oversold? Later this year might be a great time to get back in the RE market?

  19. Macro Man commented on Mar 27

    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.

  20. anderl commented on Mar 27

    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.

  21. Will Geisdorf commented on Mar 27

    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.

  22. Gary commented on Mar 27

    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.

  23. anderl commented on Mar 27

    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.

  24. Fred commented on Mar 27

    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??

  25. Ray commented on Mar 27

    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.

  26. Lauriston commented on Mar 27

    “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…

  27. Macro Man commented on Mar 27

    Given that some fairly sizeable municipalities (Houston, D/FW, Atlanta, Philadelphia, Detroit, etc.) are excluded and a relatively low-population/high price area like Vegas is included (in the 10 city index), I am dubious as to how representative it really is.

    As to the methodology, OFHEO itself uses a version of the Case-Schiller method…so I still reckon that a nationwide index is more accurate.

  28. Ray commented on Mar 27

    Then use the 20 city series.
    As for dubious, at least concede that OFHEO headline number is just that, as it should more aptly be termed “Appraisers Gone Wild”.
    Though I will preemptively note that the purchase only index is still solidly in the black. But because of the series being confined to the limit’s of the GSE’s I remain skeptical, as this writer surmises that reach and subsequent turmoil extended beyong their price point.

  29. costa commented on Mar 27

    I think using the big cities is just as good of an indicator, to see major cities home prices decline has to only have a multiplier affect on other areas.

  30. Craig commented on Mar 27

    So if the fed listens to the whiners and throws them more $, what will the $USD look like? Pay now or pay later.

    No matter what this leads to a consumer led recession.

    Oil is looking lovely these days, purchased in $USD, also a lot of food and grain. Don’t think we’ll be using imported food? Wait until Dub get’s done with corn, inflation EX- food and oil will be a joke.

    It isn’t the mortgages, it’s the credit tightening contagion combined with falling $USD and real inflation that will kill us, slowly.

    Add any interuption, like Iran, and that’s all it will take… speed it up.

  31. M.Z. Forrest commented on Mar 27

    Inflation in food directly has to do with with ethanol requirements. It is not a monetary policy issue.

  32. sasso commented on Mar 27

    If y’all are confident in a real estate implosion, you’d better start embracing deflation, not inflation. Have to keep an open mind. More than one way to adjust prices…

  33. SAM commented on Mar 27

    it says Miami and LA is up..
    don’t know about LA.but miami is at least down ~10% YOY (apple to apple)..

    where they are getting the data from?

  34. theroxylandr commented on Mar 27

    I will start buying REITs 3-4 years from now. Should be a very decent bottom… At least as good as Nasdaq in 2002.

  35. MarkM commented on Mar 27

    I thought we were all told by that one guy from that one town that by everything he knows (which is all contained at his blog and in his book) that there was no housing bubble. How did I misunderstand?

  36. Winston Munn commented on Mar 27

    Existing home sales are basically irrelevant, as this is just a reshuffling of present assets and has no strong effect on GDP – what matters is new home construction – the significant word being “new” – as in adds to GDP.

    What comes with a housing boom? jobs for electricians, plumbers, roofers, carpenters, loan officers, real estate appraisers, real estate agents, home improvement stores, carpet layers, lawn care, landscaping, swimming pools, and on and on.

    Capex follows that lead. Is there really any need for another Home Depot in Las Vegas right now? Will the builders need as many supplies nationwide? Will printers need to print as many real estate contracts?

    Capex does not spur growth – Capex follows growth.

  37. Sherman McCoy commented on Mar 27

    Kids, kids, kids… Settle down now… The people in the know… well, they know that the low housing sales right now are due entirely to the weather. Furthermore, “fundamentals have improved in the housing market and buyers see a window now with historically-low mortgage interest rates and competitive pricing by sellers.” It’s a window of opportunity, guys! A window of opportunity! How can you pass that up??!!

  38. Alex Khenkin commented on Mar 27

    “real estate is only 6% of the economy”
    By what measure? Can you point to the source of this number?

  39. Bob A commented on Mar 27

    Earth to Sherman…

  40. robert campbell commented on Mar 28

    great comment, winston munn.

    I think you have it right.

  41. brion commented on Mar 28

    Mars to Bob A–
    Sherm just forgot to add his snark tags.

  42. Chief Tomahawk commented on Mar 28

    I’m sure General Custer muttered something similar upon seeing 1/5th of the Indian camp at The Little Bighorn.

  43. Eclectic commented on Mar 28

    Winston, quoting you:

    “Capex does not spur growth – Capex follows growth.” end quote.

    I’m gonna have to disagree slightly.

    Capex occurs because of the anticipation of growth. Yes, it’s true that growth elsewhere evidenced in an economy may induce the perception that growth may continue and also be successful for some specific capex enterprise, but that very capex may in its own right lead all the growth.

    Imagine a ship full of voyagers to a new land. Upon arrival they depart the ship with an anticipation of financial success and growth. What’s their GDP at that point?… It’s zip. Where will it be without capex?… also zip.

    What does it take to get there?… It takes capex.

    If outside observers observe the newly established colony and they observe capex, what will they assume?… They’ll assume at least the GDP that comes from the capex itself?

    If outside observes observe the total lack of capex, what will they assume?… They’ll assume the culture is in the stone age.

    Therefore, Winston, I have to say that capex leads growth in GDP, although I can’t argue with you that success breeds its own resonant buffering.

  44. Eclectic commented on Mar 28


    One more thing I just missed including in my prior comment.

    Failing to observe the subtle yet very important distiction between 1)- capex as a response to the anticipation of success, versus 2)- the concept of capex for its own sake, in my opinion, is the great failure of supply-side economic theory.

    Back to my example of voyagers to a new land:

    Supply-siders are tempted to build out the capex in the anticipation that it will draw the demand to support it. They may build a village and the means of GDP production without a good basis to believe the voyagers will subsequently drop anchor in their harbor, although they’ll hope that their capex will cause them to.

    On the other hand, truly productive capex precedes GDP growth but only in an environment of accompanying demand. The voyagers must show up, and they must evidence a demand to exchange goods and services with each other. Capex then will clearly precede sustainable GDP growth.

    The primary reason for this is that the core basis for all monetary exchange is labor, either mechanical or intellectual. In other words, labor is the core of all money and resides just as persistently in a bag of gold dust, in a billfold full of fiat, or in the negotiated settlement of bartered services between neighboring farmers.

    Therein we find initial c-a-p-i-t-a-l, and the willingness to demand, provide and exchange intellectual or mechanical labor is then the basis for needing to monetize it, by facilitating that capital exchange with the use of *c-a-p-i-t-a-l*e-x-p-e-n-d-i-t-u-r-e-s* that magnify its effectiveness.

    Otherwise, those willing and able to conduct the business of commerce will simply have poorly developed tools for accomplishing that commerce, and thus productivity, the great engine of wealth creation, will have no purchase.

  45. The Dirty Mac commented on Mar 28

    I expect corrugated paper to be the most lucrative investment opportunity around today. Sales will skyrocket when large segments of the US population relocate into cardboard boxes.

  46. randy commented on Mar 28

    corrugated paper,cardboard boxes lmao
    from what i’ve seen in my neck of the woods most track (spec)housing is’nt much better then a card board box. 1600-1800 sq-ft,osb and vinyl on 1/8th+/- acre of land,200k$.come on down,easy terms,low financing,no down payment, south-side va. the real-estate/credit crapshoot has’nt folded yet,still plenty of consumers (chumps)out there. it’s like my daddy used to tell me “boy, when you’re dumb you gotta be tough”.

  47. Wealth Building Lessons commented on Apr 4

    I respect Shillers viewpoint and strong believe real estate is overpriced and will correct in many places.

    however, since the 1940s and probably since 1890, the ‘average’ home size has nearly doubled from a 900 sq ft 3/1 house to a 1700 sqft 3/2/2 house.

    shouldn’t prices be based on price/sq ft to get a more accurate picture?

    i think this real estate bust will push us into a recession.

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