Record Low for Annual Declines for Case Shiller Index

"We’re going to see continued declines in house prices, much more so in problem areas. The decline in home prices, while necessary to clear the inventories, is building in expectations of more house-price declines, which is keeping potential buyers on the sidelines.”
Mickey Levy, chief economist at Bank of America Corp

"We see no immediate signs of this housing downturn relenting."
Richard Dugas, Pulte Chief Executive Officer .

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Home price data continued to worsen in the US through May 2008. Unlike some of the foolishness heard from the perennial bottom callers, prices are actually accelerating to the downside reaching new record lows.

Marketwatch notes that home prices have returned to where they were in 2004 — any price appreciation between then and now has been wiped out. The surge in Home prices — a cumulative 52% from 2003 through 2006 — still leaves home prices significantly elevated above historical norms.

The S&P/Case-Shiller Index shows annual declines in prices of existing single family homes of 15.8%:

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S&P/Case-Shiller Composite Home Price Indices

Caseshiller_index_may_2008

Source: S&P

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This was the second straight month where all 20 regions posted annual
declines. 9 of the areas tracked are at record lows, while 10 regions
are in double-digits. Year-over-year, Las Vegas and Miami were again the weakest markets — down 28% each.

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Caseshiller_table_may_2008
Table via TFS Derivatives

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Sources:
Record Low Annual Declines Recorded in May 2008 for the Home Price Indices
S&P/Case-Shiller, July 29, 2008
http://www.globalindices.standardandpoors.com/data/pdf/CSHomePrice_%20Release_072943.pdf

S&P/Case-Shiller May 20-City Home-Prices Fall 15.8%
Timothy R. Homan
Bloomberg, July 29, 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=a1ikgtmfigTw&

Property Derivatives
Fritz Siebel
CME Housing Futures, July 29, 2008
http://www.tfsbrokers.com/property_derivatives.html

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Discussions found on the web:
  1. kerry commented on Jul 29

    Other than FL, NV, AZ, CA prices seem to have bottomed or are close to it. CA price declines were less than I would have expected based on numerous articles coming out of so cal.

    Take some Prozac and dream on about your and the IMF’s silly projection.

    Also, for the composite 20, after declining by about 2% per month for several months, April went down 1.2% versus the prior month and May went down .9% versus the prior month. This is better than I expected. For people with a working lobe, that is DEceleration.

    ~~~

    BR: Sold to you!

  2. austincompany commented on Jul 29

    It appears more and more apparent that the areas that went the highest – will fall the furthest. This is an important fact often lost by news-heads and policy makers.

    The disaster in California should not lead to give-away programs and higher taxes for the rest of us. Though (sigh) I am afraid those crazy Californians will be the death of us all…

  3. Joe commented on Jul 29

    From it’s peak to current the worst declines are:
    1. Las Vegas -31.4%
    2. Miami -31.2%
    3. Phoenix -30.8%
    4. San Diego -28.9%
    5. Las Angel3s -27.5%

    The least hardest hit are:

    20. Charlotte -2.0%
    19. Dallas -3.9%
    18. Portland -5.9%
    17. Seattle -7.1%
    16. Denver -7.5%

  4. Brian23 commented on Jul 29

    Kerry-I guess the record high inventory levels and less available credit will have no impact on housing prices. From this point on, its nothing but up. If you take away manhattan from NY Metro area, Im sure the numbers would be a little worse. There is an 11.1 month supply of existing homes and a 10 month supply of new homes. I have not even mentioned the “shadow inventory” of REO’s foreclosures and short sales. All of this will put another 12-18 months of downward pressure. Again, less available credit means less buyers. Its only logical to think we have bottomed.

  5. Jeff commented on Jul 29

    And yet the market is still up on “lower oil and higher consumer confidence” surveys.

    Isn’t lower oil at this point a clear recessionary sign? So I guess this means people think we’re at THE “bottom”. Still not nearly enough fear for there to be THE bottom. More pain ahead.

  6. super-anon commented on Jul 29

    Other than FL, NV, AZ, CA prices seem to have bottomed or are close to it. CA price declines were less than I would have expected based on numerous articles coming out of so cal.

    Nice troll.

    Existing home inventory just hit 11.5 months of supply and fixed mortgage rates are up dramatically since May.

  7. Renting in Mass commented on Jul 29

    Brilliant analysis kerry. Focusing on MOM while ignoring YOY is definitely the way to go. Kudos.

  8. Jeff commented on Jul 29

    Kerry – just where are all the buyers going to come from to fill all of the open homes, especially when people are leveraged up to their eyeballs, can’t get easy access to credit, and don’t have enough for a 20% down payment? Prices are going to drop even further. We’re not even close to the end. Probably will get there by mid to late next year. If not, then we’re all in deep do-do.

  9. Juhuti commented on Jul 29

    Oil is down most likely because of margin calls. Hedge funds and IB’s need money for the margin calls so they use the profit from their oil holdings. Just my .02

    I think the other financials are paranoid because of NAB and Merrill. The truth is starting to come out and they can’t stop it.

  10. Brian23 commented on Jul 29

    Jumbo mortgages trade wider than conforming. They are alos harder to get now. High priced areas will get hit more. I would venture to say total housing inventory is comfortably near 2 years. This is no where near a bottom.

  11. Mind commented on Jul 29

    From Cape Cod –

    High-end homes with water view holding steady (in nominal prices). Mid-market -> soft, on the way down, bottom in 2010.

  12. Juhuti commented on Jul 29

    Oh yeah, “the Desk” had 29b in TOMO this morning. They knew that they had to prop up the market today.

  13. Flic commented on Jul 29

    I’ve been saying it for years, ignoring all of the other fundamental problems with housing (supply, economy, etc), the act of requiring 10-20% down and having to prove income will cut prices in half across the board. Oh wait, Erin Burnett said that if you bought before 2004, you were still sitting pretty. Of course that would be assuming none of these people cashed out all that phantom equity. I know many people that bought prior to 2004 and are in worse shape than home-debtors that bought recently. We’ll be back to late 90’s prices soon enough…..

  14. Darkness commented on Jul 29

    >Also, for the composite 20, after declining by about 2% per month for several months, April went down 1.2% versus the prior month and May went down .9% versus the prior month.

    Even flat would be a decline month to month during the annual season of peak demand. But no matter, jump in and buy. No one is stopping you.

    Personally, I’m getting things set to build when this recession looks its bleakest. I’ve already seen lovely wood flooring being dumped on the market at record low prices, not to mention a glut of “antique” wood from tear-downs. After six years of having to struggle to hire contractors to do anything, now when I call, the president of the company answers the phone and talks my ear off for half an hour about what he can do for me. Whooo hooo!

  15. Sherman McCoy commented on Jul 29

    With year-over-year numbers, the price decreases are indeed accelerating.

    Month-to-month continues to experience price decreases too. But the magnitude of the decreases for this measure are DECELARTING.

    CR made this point earlier today.

    If this holds up, the year-over-year price decreases 6-12 months from now won’t be of such high magnitude as they are now.

  16. Stuart commented on Jul 29

    Market doesn’t seem to care anymore. Have to pump going into month end to preserve bonuses.

  17. Bergen County Real Estate commented on Jul 29

    I agree with most of the posters. We’re not at the bottom yet but we may be getting close. After that though, there’s only one direction to go.

  18. kerry commented on Jul 29

    Brian, whoever you are, I think the composite 20 could go down another 5-10% from May. However, the problems are becoming regional, and the composite 20 is not a good gauge of the nation. Read the Case Shiller backup and actually read the IMF paper (which I thought was poor).

    Go download Case Shiller and spend time looking at the numbers. I have.

    In many non-bubble areas I think we are close to bottoming or have bottomed. When people realize that credit will reappear… over time. In the bubble regions, who knows what will happen? HOWEVER, there is a lot more to the numbers than just looking at the change in average price over time (at least outside of the bubble regions).

    Also, I was short the stock market up until late June. I’m not a wild eyed bull in the slightest. The problem is, right now the short side is way too crowded and the arguments are getting delusional.

  19. Bob A commented on Jul 29

    The table at the end of the linked page (a different Bob) shows pending sales in King County, WA still below 2000 levels.

    In my neighborhood, I have seen a LOT of sold signs go up in the last 30 days on new and used properties that had been available for months in the $850-2.5m range. And these buyers are having to put at least 20-40% down to finance these homes.

    http://www.washingtonrealestatepage.com/bobsbugle

  20. cm commented on Jul 29

    Barry, don’t you mean “record HIGH declines”?

  21. franz commented on Jul 29

    All I know in WDC, I see more houses available at lower prices and still I have one person in my office complain that he can not sell his house. He has dropped it 50% from his previous high but it is not moving as it has to compete with foreclosures and the lack of buyer financing. For example, I have money for a 5% downpayment but I can not get financing in the WDC area unless I have 10 to 20% to put down. No worries as I have time as I continue to pay off debt.

    I still expect continueing decline in certain areas like WDC where approximately 50% used fancy (no doc, no income verification, option arms, interest only, etc) financing terms. As these terms reset, they will have to handle higher interest rates and paying the entire mortgage (principal and interest). Some will have to sell which will increase the supply.

  22. Renting in Mass commented on Jul 29

    kerry: You say you’ve done an analysis of the numbers that leads you to believe that housing has bottomed (or is close to it), and anyone who doesn’t agree is delusional. So far, the only numbers you’ve used to back that up are a slight downtick in MOM declines. What else are you basing you assumptions on? Lay it on us.

  23. Chuck Ponzi commented on Jul 29

    Month-to-month continues to experience price decreases too. But the magnitude of the decreases for this measure are DECELARTING.

    Sherman,

    What CR did not mention is the seasonality that housing has. Year over year is the only important measurement otherwise you have incongruent time periods for comparison. Summer months always have stronger demand, and therefore slower declines in down times and faster appreciation in up times.

    Chuck Ponzi

  24. Brian23 commented on Jul 29

    Bergen County Real Estate – I think YoY, the 20 city index can go down another 10%. I think most places increased at an abnormal rate during the boom,but I agree that the areas that werent as inflated, will see less declines.
    The Case/Schiller is weighted, so the some areas may be down more or up more than whats reported. You will have to look at the numbers, as I understand you have. I think thats the only way to get a true understanding. The rent to price ratios are still above long term historical avg’s and although affordability is better now, its still not to the levels that are near historical norms. The NE seems to be acumulating inventory also, however not at the pace some of the other bubble areas are. Getting financing is still difficult. I just received a rate sheet last week with about 20 banks quoting rates, and not one was asking under 20%, for Jumbo or conforming. This will provide difficulty to individuals looking to buy and slow the sales rate down while pushing up inventory. Especially when you consider Jumbo mortgages are trading wider everyday. At the end ocf the day, its how each of these products can get traded in the secondary market and the homes those products support are affordable. Right now, both those factors are poor. I still see another 12-18 months of negative HPA.

  25. kerry commented on Jul 29

    renting in Mass, outside of the bubble regions in many areas we are bottoming or the declines are slowing down such that it appears we are close in terms of inflation adjusted changes.

    For the CS20 numbers, these regions include Dal, Cle, Cha, MN, Bos, Chi, Atl, Den, Det, Por, Sea. Note that Detroit, Por, and Sea are more questionable. Given the rate of decline, some of the bubble regions like Phx and LV could bottom fairly soon in time, just given the current rate of decline. CA and FL- who knows? NY is also a question mark.

    I just told my brother NOT to buy a place in Florida, so you know.

  26. ron commented on Jul 29

    Many are buying into the idea that we have a bottom and are taking REO properties mostly to quickly rehab as rentals while some first time buyers are using Down payment asist plans which will soon be coming to an end. In my local area the REO rehab to rental boom is quickly turning the rental market into a variety of low ball 1st month free offers with other garden variety signs of market stress. Knife catchers abound but are very active below 350K plus while REO prices continues to decline each month making the previous month buyer a loser in particuliar those using the FHA 3% DPA plans.
    Many folks do not understand that the run up in prices particuliarly in the SF Bay Area was in the bottom to middle price range. The dot.com period had seen a run up in the high end so during the 03-06 period it was the 175K home to 500K or the 450K to 800K that saw the large % of appreciation while the top end hardly moved. So in many ways the sudden surge in lower priced REO property recently reflects some overflow from the recent RE bubble.

  27. Renting in Mass commented on Jul 29

    kerry: Here are the Boston YOY numbers since January:

    Jan -3.4
    Feb -4.6
    March -5.9
    April -6.4
    May -6.2

    Is that .2 all it takes for you to be confident that the bottom is in? Wouldn’t you like to see a few more months to see if it’s a trend or a blip?

  28. Renting in Mass commented on Jul 29

    And does it even make sense to say that prices have bottomed just because the rate of price declines has slowed? Isn’t the bottom when prices hit their low point?

  29. Mark E Hoffer commented on Jul 29

    BR,

    Table via TFS Derivatives link and this link Property Derivatives
    Fritz Siebel
    CME Housing Futures, July 29, 2008
    http://www.tfsbrokers.com/property_derivatives.html

    are the same, que pasa?

    speaking of languages, people are buying things everyday and they, too seldom hear; ” Sold to you!”, maybe that’s the gavel that would wake them up..

  30. BCA Daily Insights commented on Jul 29

    Rising mortgage rates and mounting inventories warn that the U.S. housing slump is far from over.

    Congress is trying to ease the burden on stretched homeowners, and moved decisively to prevent a meltdown in the GSEs. However, while positive, these efforts are not sufficient to turn things around. The ongoing economic slump and intense inflation fears are worsening the already grim housing outlook. Bond yields have risen in recent months, pushed up by increasing inflation concerns and comments from some members of the FOMC – Federal Open Mouth Committee. Financial institutions are also (belatedly) widening spreads and tightening lending standards. Moreover, the stock of unsold houses remains far too high to stabilize house prices, especially existing home inventories which hit a new high last month. Bottom line: Mortgage rates and inventories need to decline before housing stabilizes. Until then, the economy and banking system will remain at risk.

  31. BCA Daily Insights commented on Jul 29

    Rising mortgage rates and mounting inventories warn that the U.S. housing slump is far from over.

    Congress is trying to ease the burden on stretched homeowners, and moved decisively to prevent a meltdown in the GSEs. However, while positive, these efforts are not sufficient to turn things around. The ongoing economic slump and intense inflation fears are worsening the already grim housing outlook. Bond yields have risen in recent months, pushed up by increasing inflation concerns and comments from some members of the FOMC – Federal Open Mouth Committee. Financial institutions are also (belatedly) widening spreads and tightening lending standards. Moreover, the stock of unsold houses remains far too high to stabilize house prices, especially existing home inventories which hit a new high last month. Bottom line: Mortgage rates and inventories need to decline before housing stabilizes. Until then, the economy and banking system will remain at risk.

  32. BCA Daily Insights commented on Jul 29

    Rising mortgage rates and mounting inventories warn that the U.S. housing slump is far from over.

    Congress is trying to ease the burden on stretched homeowners, and moved decisively to prevent a meltdown in the GSEs. However, while positive, these efforts are not sufficient to turn things around. The ongoing economic slump and intense inflation fears are worsening the already grim housing outlook. Bond yields have risen in recent months, pushed up by increasing inflation concerns and comments from some members of the FOMC – Federal Open Mouth Committee. Financial institutions are also (belatedly) widening spreads and tightening lending standards. Moreover, the stock of unsold houses remains far too high to stabilize house prices, especially existing home inventories which hit a new high last month. Bottom line: Mortgage rates and inventories need to decline before housing stabilizes. Until then, the economy and banking system will remain at risk.

  33. BCA Daily Insights commented on Jul 29

    Rising mortgage rates and mounting inventories warn that the U.S. housing slump is far from over.

    Congress is trying to ease the burden on stretched homeowners, and moved decisively to prevent a meltdown in the GSEs. However, while positive, these efforts are not sufficient to turn things around. The ongoing economic slump and intense inflation fears are worsening the already grim housing outlook. Bond yields have risen in recent months, pushed up by increasing inflation concerns and comments from some members of the FOMC – Federal Open Mouth Committee. Financial institutions are also (belatedly) widening spreads and tightening lending standards. Moreover, the stock of unsold houses remains far too high to stabilize house prices, especially existing home inventories which hit a new high last month. Bottom line: Mortgage rates and inventories need to decline before housing stabilizes. Until then, the economy and banking system will remain at risk.

  34. kerry commented on Jul 30

    renting in mass, we won’t know for sure until after the fact. In nominal terms I think we are better off in non bubble regions than many expect right this second.

    Interestingly, 6 months ago (and even 3 months ago) I was pounding the table that things would be worse than people expected.

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