Oct
30
2007
S&P/Case Shiller Report Released Today
By Charles TurnerThe S&P/Case Shiller Report came out this morning. It reports with a two month lag; today’s release is for August.
Home prices in 20 U.S. metropolitan areas were down from a year earlier for an eighth straight month in August, a private survey showed today.
Values dropped 4.4 percent in the 12 months ended August, the most since records began in 2001, according to the S&P/Case- Shiller home-price index.
The data for Portland is pretty much flat, as it has been much of the year:
Excellent post today on the CalculatedRisk blog titled Housing Busts and Sticky Prices. He took a look at the ’89 to ’96 housing slump in SoCal and he concludes:
That is my expectation: we will see the most significant price declines for this cycle over the next two years, followed by more modest declines for a couple more years in the more bubbly areas.
Looks like another 4 years before this roller coaster is down to the bottom.
That’s an interesting article TiP. Thanks. I think it is real dissapointing for all of us, bull or bear that the slump could drag out for that long.
Futures have been trading based on the Case-Schiller index for a couple of years now, and my understanding is that the futures are predicting housing prices to be below todays levels in 2011.
Is it ironic that Robert Schiller, who studies bubbles and wrote Irrational Exuberance, helped create this index?
We rarely see data over such a long time period, so thanks for posting the graph.
It is interesting that the graph looks mostly linear. I would have expected, based on inflation, that it would look exponential. Or is this already adjusted for inflation?
Personally I think the bust will be faster due to the financial bombs people are now sitting on with the “creative finance” that’s been used over the last few years.
And by “Creative” I mean dumb as bricks.
Certainly it’s progressing way faster in California and Florida than ever before.
Uncle_Git: Maybe. But Human nature is still the same. I suspect it’s going to take a few years till we hit bottom here.
Of course there’s another scenario and we’ll find out soon if that’s what the Fed wants to (continue) to do: debase the currency. In that scenario housing prices don’t fall all that much from where they are now, but everything else becomes much more expensive ($5/gallon gas, for example). It could be that the Fed wants to inflate out of this problem instead of taking our economic medicine and letting housing prices go back to more realistic levels. The “let inflation run rampant” scenario is much worse than the “let housing prices go down more in line with wages” scenario. I still remember the 70s.
Inflation won’t help house prices that much if at all.
There I said it
Unless we get substantial wage inflation along with it – and I don’t see companies in a rush to increase our paychecks 20% a year do you ?
If anything inflation will damage housing further as the “Must have” portion of our monthly balance book for things like Food and Gas will increase significantly faster than wages – dropping what we can afford to pay for shelter further.
Inflation won’t help house prices that much if at all.
UncleGit: I don’t disagree. I’m just considering a scenario where it might look like housing has only fallen about 5% in a few years, but in inflation-adjusted dollars the fall would actually be more like 20 or 30% that we’re currently expecting in many areas.
I don’t see wages going up much here even as the dollar tanks. If they do go up, they certainly won’t go up as fast as prices for things like food and energy are rising.
Most of us here in the realworld know that the government’s inflation numbers are under-reporting the inflation rate. My fear is that this is actually making the situation even worse – resulting in doing things like lowering interest rates as consumer prices are rising, for example. The US$ is at record lows and yet the Fed still lowers rates…
Inflation can only mask house price decreases if people can afford to pay the same dollar value for a property – albeit in debased dollars.
Of course that implies wage inflation for people to be able to sustain todays prices – and with the funny finance gone that’s not happening.
Housing is going down in real and inflation adjusted dollars no matter what.
Unless we see wage inflation – and there is no hope of that with the economy being tipped into recession by a housing driven consumer spending contraction.
2.7% YOY for 8/07 vs. 15% for 8/07.
Negative appreciation coming up in early 08.