Tuesday, August 30, 2011

Housing price declines lessen further in August

- by New Deal democrat

Housing Tracker's final report of asking prices in 54 metropolitan areas for August is in, and it shows that the YoY rate of declines continues to lessen, now only -2.8% YoY. Here's the updated chart:

Month2007 2008 2009 2010 2011
January ----7.5%-11.5%-5.8%-8.7%
February ----7.8%-12.0% -5.2%-8.4%
March ----8.3% -10.9%-5.0%-7.3%
April -2.7% -8.6%-9.6%-5.0%-6.8%
May -3.5% -9.1% -8.1%-5.0%-5.6%
June -5.0%-9.8%-7.0%-5.0%-4.4%
July -5.4% -10.4%-6.1% -5.1%-4.2%
August -6.0% -10.6%-5.5%-6.1%-2.8%
September -6.2% -11.1%-5.1%-6.6%---
October -6.7% -11.4% -4.5%-7.0%---
November -6.6%-11.7%-4.5%-6.7%---
December -7.2% -11.4%-5.6% -7.8%---

If this rate of second derivative improvement continues, we could see a YoY increase in asking prices nationwide before the end of the year. If so, that would mean the nominal bottom in housing prices has already occurred -- probably last January (because of the strong seasonality in housing prices)!

Additionally, as Calculated Risk notes, Housing Tracker's updates continue to show that inventory is also declining.

Note that Housing Tracker is current through last week, vs. this morning's Case-Shiller report, which is an average of April, May, and June. Because of the distortions resulting from the $8000 tax credit that expired in spring 2010, it is interesting to compare 2011 YoY vs. 2009 Case-Shiller index as well as 2011 YoY vs. 2010. Here are the numbers - the first column is vs. 2010, the second vs. 2009:

February: -3.5% -2.7%
March : -3.9% -1.4%
April : -4.2% -0.6%
May : -4.5% 0.0%
June: -4.5% -0.6%

With May and June's data, I suspect the YoY% declines in the Case-Shiller index have made a trough. In the next month or two, with the end of the YoY housing credit distortions, I expect Case Shiller to join Housing Tracker (which is current through last week) in reporting "less worse" declines.

Additionally, with today's data we can see that the seasonally adjusted Case Shiller 20 city index has meandered within a range of less than 1% in the first six months of this year. I bet that little fact isn't getting mentioned on other blogs, is it?

BTW, Dante Atkins a/k/a thereisnospoon has a piece up at Digby's Hullbaloo, purporting to show that present housing prices are still way too high. While I very much appreciate his political commentary, this economic piece is badly misleading.

The "roller coaster ride" of prices is not adjusted for YoY% changes in housing prices For example, there was a 10%+ decline in real housing prices between 1926 and 1933. Even more glaring, there was a 35%+ decline in housing prices between 1912 and 1921 -- almost identical to the declines since the beginning of 2006 till now. Go back and watch the roller coaster ride and pay attention to the markers that tell you when you are in the 1910's, 1920's and the Great Depression. The "roller coaster" stays almost completely flat -- during two of the three worst downturns in the last 100 years!

Thereisnospoon suggests that housing has much, much further to fall, but in fact, this series has never been at a level under 110 since 1949. It is presently at about 132, and thus is only about 15% higher than its lowest reading in 62 years. I expect almost all of the remaining adjustment to take place via inflation rather than a continuing decline in nominal prices.