WatchAlright, I'll start the inevitable thread on this topic.
http://www.calculatedriskblog.com/2010/10/case-shiller-home-prices-declines.html
Calculated Risk has been saying for months that we had to wait for the Jun-Jul-Aug Case-Shiller numbers (released today October 26) to see home prices starting to fall as the effect of the $8k (et al) tax credit dissipates.
CR was right. The data is in. Seasonally adjusted house values are falling again, and broadly so.
More from CR:
Prices increased (SA) in only 1 of the 20 Case-Shiller cities in August seasonally adjusted. Only New York saw a price increase (SA) in August, and that was very small.
Prices are now falling - and falling just about everywhere. And it appears there are more price declines coming (based on inventory levels and anecdotal reports).
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47 male
Lafayette, CA
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The 10-city index was down .1%
The 20-city index was down .2%
The "widespread declines" are so small that they barely show up on a graph. A .1% decrease annualized is 1.2% and very probably within the margin of error.
Anyway I'm on to Calculated Risk now. I know how they are arriving at their "brilliant" market predictions and I know WHY they have backed away from calling a severe market downturn. Here is their limp-wristed conclusion:
Like that? "Downward pressure", "very concerning", "weak for some time". It's enough to make someone slightly worried.
The real question is why, and I can answer that question.
- Inventory is dropping fast and hard. What CR calls "decreased slightly" I call a very significant drop. Not only did inventory drop from August to September, unmentioned is that it also dropped from July to August. Inventory levels are almost exactly what they were in September 2008. Y'all remember September 2008 right? The market turned around the following Spring.
- Existing home sales are up 10%
- Consumer confidence is up in September
- Listing prices are SHARPLY higher in California and are a leading indicator of 2-3 months.
- The stock market has had two extremely good months. (wealth effect)
So although Calculated risk is predicting almost nothing, I will do much much more. Case-shiller numbers will report lower prices in their November, December, and January reports. (I said this in September) February things will turn around and by Spring we'll be seeing prices take off again.
Anyone else care to make a specific prediction?
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iwog is the "Comical Ali" of housing
http://www.youtube.com/watch?v=IMqU8vE65g8&feature=related
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iwog says
I would say that your prediction is not much braver than the whimpiness that you accuse CR of.
By the way, is your prediction with or without government or Fed intervention, such as the much anticipated Fed QE2 (Quantitative Easing, round2)? Or further tax credits?
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HousingBoom says
No, I just get tired of blogs like CR which sound more like a television psychic than an economic prognosticator.
Instead of "The market is going down" as I wrote, they say "downward pressure on house prices". WTF is "downward pressure on house prices"? Instead of saying "YoY inventory is at record levels and will kill the market" they say "It's very concerning".
They are predicting nothing. I know the next two or three reports are going to show a declining market because sales were down for those months, inventory was climbing, and listing prices were falling. CR mated their prediction to the expiration of the housing credit, but that's BS because if true it would show up as a very sharp decline in today's report. It did NOT show up in today's report which means it wasn't a significant factor.
This is all water under the bridge caused by a CS report which lags 4 months. As of right now in October 2010 prices are heading higher although they will be moderated by the winter sales slump. Spring will surprise everyone.
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justme says
But you wont say why. I was VERY specific why.
justme says
Government intervention is a fact of life and will be applied if the market shows weakness. If the market grows stronger it will be withdrawn. My prediction is that whatever the government and fed does, it will support a recovery.
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Iwog,
Bottom is falling under your bu$$. Why is today's sold $/sq.ft. lower than your 2009 bottom?
http://www.redfin.com/city/9927/CA/Lafayette
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47 male
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Dude, Lafayette has a population of about 25,000 people. Your data consists of EXACTLY 24 homes.
I'm not worried about it and you shouldn't be either.
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Wow, looking at historic (C/S Index) data for the SF Bay Area, the July to August reversal (positive to negative) is unprecedented. I said in the previous months that it looked like we were around 1994 or 1995; the August numbers are so ugly that it looks more like 1992 or 1993. (All NSA, BTW. CR has posted previously about the dubious nature of SA, so I don't put much stock in them. One look at the spreadsheet will tell you why.) Will be interesting to see what September has in store.
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Poway, CA
middleman's website
Brother iwog,
Don't be so free with your financial/mortgage advice - especially when it's not appreciated. We have a very small window of opportunity to build wealth in this depressed housing market and if everyone was on board, the window wouldn't exist.
I bought a house, that I call my home in June of this year (San Diego County). I started a compost system, dug some trenches and installed a sprinkler system, and enjoyed lots of gardening. My wife and two toddlers love to help out and run around OUR yard, chasing lizards, picking oranges, and making memories. We watch less TV then we did when we were in an apartment, which has improved the behaivor of my children immensely. I've lost weight and my health has improved because I'm off my arse and slowly working down my "honey-do list". I can honestly tell you I'm the happiest I've been in years! I'd hate to have put this off fo another 10-15 years out of fear my home value would go down. It makes me sad to even think about it.
My house isn't going to make me a multi-millionaire....(or will it??!!?? j/k), but it is building my wealth of health, happiness, and pride.
Case-Shiller?? They don't control my financial decisions or happiness.
I'm glad for people who are fortunate enough for the oppotrunity to buy a home and wish them the same happiness.
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EBGuy says
EBGuy, that is a good point. That is a very bearish sign.
Side note:
Iwog was angling (on the other thread) to get people to agree that the tax break had no effect because, LOOK! , the drop in August was "so small", "after the tax break expired". Of course this is BS because there is a ton of tax-break-included closings in the Jun-Jul-Aug numbers.
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middleman says
He is not trying to help us with advice, although he may think he is.
The real motivation is to get enough sheeple onboard that the holes in the bottom of the ship are covered by the trampling feet of the herd.
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justme says
It seems this may be the case for the doom and gloomers.
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justme says
OK--the end of the tax break effect keeps moving forward. For once and for all, when do you think the CS numbers won't have any effect from the tax break?
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won't have any effect? who freaking knows that? did it pull forward buyers who would have bought in the next six months? next year? And compared to what, we had three separate types of credits from the original $7500 loan you had to pay back, to the first credit which was supposed to end in November...
I would say a declining effect for the next year, but since precisely zero research has been done on the matter, that is a pure guess.
today, home prices are being propped UP by the delay in foreclosures, due to various bank slowdowns, moratoria. How much of an effect and when will that end? Who knows that one either...
Simple point is, without manipulation, we would have had more homes for sale, and fewer buyers... YOU do the econ 101 conclusion that follows.
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robertoaribas says
Good point. I should have asked--when will the CS numbers not be positively affected by the tax credit?
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iwog says
Okay then you gotta tell me what is your thresold. 200 houses? 500? So I won't bother you next time.
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tatupu70 says
Your original question was likely more a rhetorical device than a real question, but AFAIK some of the deadlines for closings that can still include the tax credit have been extended into September.
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I was wondering what spin the Shiller the Schil would have on August market.
I bought at the end of July beginning of August.
With my Max I was willing to spend and criteria on space and home, I've had two or three hits in three years tops. July alone, I saw 10 houses, all of which were bellow $175 the house I bought was reduced from $199 to $170K I got it for $160. And all of those other houses under $175 I was looking at in July were down from as much as 229K.
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justme says
Yes of course. 90 day closings are a significant portion of the market and not 1 or 2%.....
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bubblesitter says
You can bother me all you'd like. I'm just keeping perspective. The smaller your sample, the more chaotic it gets.
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middleman says
I don't think you're supposed to talk about that. ;)
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middleman .... for which RE broker do you sling house-crack?
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iwog says
I'll have to agree with IWOG on this one, the market may still be declining, but the rate of decline has slowed significantly. The biggest drop in prices occurred between 2007 and 2008, if I only had this graph to base my predictions on, then I would say the market has reached it's bottom. I am still concerned with the number of housing banks still have / and will get on there books, so I'm not calling the bottom yet.
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TechGromit says
No one can ever call a bottom until businesses start hiring and spending. Until then it is all denial.
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TechGromit says
Everybody will be calling the bottom 2 years after housing prices drastically improve. Then the talk will be...."If I would've...", or "I wish I would've..."
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For some context, here's a list of the past years where the C/S SF Bay Area Index has seen a drop from July to August: 1990 (-.2%), 1992 (-.5%), 1993 (-.03%), 2001 (1.4%), 2006 (-.2%), 2007 (-.2%), 2008 (-3.5%), 2010 (-.3%). Again, note that in all these years (save 2010), the July to August drop was preceded by a June to July drop. The 2010 anomaly could be the result of:
1. Govt interface
2. Pent up demand
3. Availability of financing
4. All of the above
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middleman says
That's not "calling the bottom." You're confused or confusing.
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FunTime says
like many bulls. he's thoroughly confused.
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TechGromit says
folks, IMHO this is going to be a very long and grinding process.
Where's the reversal going to come from? The bon temps of 2002-2006 were utter bullshit and they actually damaged us economically.
The 1990s gave us an employment boom, but that was the front-end of the benefits of globalization. Now we're looking at paying the piper for the gains we got then.
People need to internalize what this graph:
http://research.stlouisfed.org/fred2/graph/?g=103
is telling them.
We're fucked. Without that $5T boost in government debt 2008 to now we wouldn't even have an economy.
The leading edge of the baby boom is turning 65 this year. Either we raise taxes or we print money to fund their retirement & medicare promises.
The electorate in its infinite wisdom put the Republicans back in power last year, so the system is locked up.
In 1995-2000 this was not such a crisis since the Dems had actually done the heavy lifting of reforms immediately prior to being booted.
They didn't do that this time, so things are a lot more fragile now.
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EBGuy says
Weren't 1992 and 1993 the bottom of the last housing market? We're currently in a HOUSING DEPRESSION since home value dropped more than the Great Depression.
justme says
Nice. Bring it on. I've been waiting for it. It's a great opportunity to buy for those that follow history. Both home prices and interest rates are down since 2006. What's not to like?
Well, maybe when home prices are 90% to 95% off from the peak and interest rates are at 2% for a 30-year fixed. That would be the ideal time to buy. Yep, don't be a loser and buy now. Renting is a smarter choice. ;)
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Weren't 1992 and 1993 the bottom of the last housing market?
No, in the SF Bay Area we pushed sideways (and ultimately LOWER) for the next couple of years before finally turning the corner in March 1996 (65.92). In each year preceding 1996, there was, of course, a seasonal head fake. IMHO, turning negative earlier than the Sept. C/S report will be a very bad sign. To be fair, the absolute low in the previous downturn was 65.79 in March 1994.