S&P Case-Shiller home price index continues to slide

The S&P Case-Shiller home price index for August 2008 was released today by Standard and Poors. The composite-10 declined 1.10% from July 2008 and declined by 16.97% from August 2007. The composite-10 is now down 21.96% from its peak. All 20 individual markets are still down year over year with Las Vegas and Phoenix down the most at -29.49% and -29.45% respectively. Charlotte and Dallas are down the least year over year at -2.24% and -2.00% respectively. 2 markets were up in August compared to the previous month (Boston and Cleveland). The markets with the biggest declines from the peak are also declining the fastest; and some of the markets that declined the least are starting to rise. 8 markets have now dropped over 25% from their peak.

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The CME futures market is pricing in a further drop of -10.08% by next August 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.  And this was before the credit crisis intensified in September and October.  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, and by 5.7% in September. The CME futures market is pricing in that housing will bottom at 150 in November 2010. This is a 15.1% further drop from August 2008's mark of 176.6. The CME futures are pricing in that the home price index will recover to 160 by September 2012.

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