Wednesday, December 31, 2008

Case-Shiller Home Price Index post an accelerating decline


The S&P Case-Shiller home price index for October 2008 was released today by Standard and Poors. The composite-10 declined 2.00% from September 2008 and declined by 19.03% from October 2007. The composite-10 is now down 24.97% from its peak. All 20 individual markets in the composite-20 are down year over year with Las Vegas and Phoenix down the most at -31.68% and -32.65% respectively. Charlotte and Dallas are down the least year over year at -4.45% and -3.09% respectively. All 20 markets were down in October compared to the previous month. The markets with the biggest declines from the peak are also declining the fastest. The 10 markets with the biggest declines from the peak declined by an average of 3.27% in October compared to September while the 10 markets with the smallest declines from the peak declined by an average of 1.45%. 9 markets have now dropped over 25% from their peak. The Composite-10 has now declined at a faster pace year over year for 22 straight months now.


You can click on the images for a larger view.



The CME futures market is pricing in a further drop of -12.58% by next October for the composite-10. The home price index is not seasonally adjusted. In the last 20 years, home prices have averaged appreciation of 5.29% a year. March through August are typically the strongest months for appreciation and home prices have on average appreciated by 4.40% during that 6 month period. September through February are the weakest months; home prices have on average appreciated by only 0.89% during that 6 month period. In 2007, the declines were moderate in the first half of the year and started rapidly declining in August. The composite-10 did not record a 1% loss month over month until October 2007. Right now we are declining at a faster pace than we did last year at this time. The month to month change in the composite-10 bottomed in February when it declined by 2.80% in one month and peaked in June with a 0.61% decline over the previous month. S&P Case-Shiller index uses a three month average. The existing homes report issued by the National Association of Realtors gives a glimpse of how home prices are doing (although it uses median prices instead of the more accurate method of paired sales that is utilized by S&P Case-Shiller). Prices peaked in June 2008 and dropped by 2.2% month over month in July, by 3.4% in August, by 5.7% in September, by 2.6% in October, and by 2.8% in November. The CME futures market is pricing in that housing will bottom at 142 in September 2010. This is a 16.4% further drop from October 2008's mark of 169.78. The CME futures are pricing in that the home price index will recover to 152 by September 2012.







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