The S&P/Case Shiller® composite index for the month of March was released today.
"'The housing market may be in better shape than this time last year; but, when you look at recent trends there are signs of some renewed weakening in home prices,' says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. 'In the past several months we have seen some relatively weak reports across many of the markets we cover. Thirteen MSAs and the two Composites saw their prices drop in March over February. Boston was flat. The National Composite fell by 3.2% compared to the previous quarter and the two Composites are down for the sixth consecutive month. While year-over-year results for the National Composite, 18 of the 20 MSAs and the two Composites improved, the most recent monthly data are not as encouraging. It is especially disappointing that the improvement we saw in sales and starts in March did not find its way to home prices. Now that the tax incentive ended on April 30th, we don’t expect to see a boost in relative demand.'"
11 comments:
If this year is anything like the last, this should be the last month in which we get negative MOM numbers. However, given the expiration of the tax credit, we very well could see continuing MOM declines for the next few months.
Even if (because of the expiring tax credit) prices do rise MOM its very possible they do not rise as much as they did last Apr-Sept. Thus, its very possible where we have a situation where the MOM numbers rise, but because they didnt rise as much as last year, the YOY gain starts to diminish.
Anon-
I am confident that MOM losses will continue through most of this year even though there was a large rush to buy in April-June. We may see increases in the lower priced houses, but this will if this happens it will be too small to offset the decreases in higher priced houses. Once the credit expires I think we will continue to see price drops across all three tiers. I would be surprised if there is a single positive MoM number in the next half a year.
As I said before - correction resumes...
"housebuyer said... I would be surprised if there is a single positive MoM number in the next half a year."
Interesting perspective HB. Im curious, since you are ruling out any MOM increases for the first half, I assume you are also ruling them out in the 2nd half (when seasonality kicks in and prices naturally decline MOM). Correct?
If so, and we have a good 12 months of MOM declines ahead of us, I am assuming you think they will be pretty slight. Rationale being, if we have given up 5 points in the past 6 months (from 180 to 175), we really cant drop much quicker and still stay at or above the 165 bottom established last march. Thus, I am assuming you think they are slight, correct?
I also assume you think the absolue bottom has to be next spring and that we do get a seasonal rise in the first half of 2011. Otherwise, it seems like we would "run out of room" for a bottom of 165. Correct?
Dont get my tone wrong with this line of questioning. My initial thought was that we would see a seasonal MOM bounce this year, just that it would be more slight than normal due to the headwinds of the lapsed tax credit. However, given how prescient you have been with case shiller thus far, I am inclined to defer to your judgment as you really seem to have good instincts on how this works.
In any event, are you seeing it as I described above, (i.e. small declines for the next 12 months, and bottom spring 2011)? Or are you thinking something different?
Anon-
I don't believe prices are as seasonal as many news sources make you believe. Prices increased every single month from 2000-2006 and decreased every single month from 2006-2009. I think the seasonal impact is a couple tenths of a percent/month while the trend can be 1-2%/month.
So I don't think I am necessarily saying that prices will continue falling next winter, because that is further away than I am willing to predict (The general economy and government intervention is more important over the long term). You are correct though that I do not see losses speeding up much I continue to think we will lose close to about 1 point per month so it would take most of the year before we get below 165. I think once we get into this range there will be more support from investors and new demand that was created over the year.
hb,
dead on with that .3! :)
"Housebuyer said...
I don't believe prices are as seasonal as many news sources make you believe. Prices increased every single month from 2000-2006 and decreased every single month from 2006-2009. I think the seasonal impact is a couple tenths of a percent/month while the trend can be 1-2%/month."
Gotcha. OK, this looks like the main difference in our thinking as I do put alot of emphasis on the seasonal influence (at least recently).
Out of curiosity, what is your take on the percentage loss we saw April-August 2008? In that regard, you will notice that we went from losing (approximately) 2.4% per month prior to April -- and then a drastic deceleration to a loss of about 1% per month April-Aug, -- and then a significant re-acceleration back up to over 2% per month in Sept & beyond? My take was that reduction in loss was primarily seasonal.
Likewise, when you called for us to go from a negative to a positive in April 2009, I assumed too you were imputing a significant seasonal aspect.
To be fair, we did not see much of a seasonal deceleration in the summer of 2007, or really much of a difference at all during the 2000-2005 runup. However, I just assumed the swing we saw in 2008 & 2009 was a seasonal aspect that had apparently recently developed.
Anon-
I think 2008 had a lot to do with the economy / stock market. Prices had been falling at over 2% in early 2008, because housing was way overvalued. It then slowed too just over 1%, and I think would have stayed at this level as housing was less overvalued at this point (and the financial system looked safer after Bear Sterns was saved), but then the wold economy started blowing up. In September Lehman failed and shortly after that all hell broke lose in the markets causing a large amount of fear. Because so few people were willing to buy, but some people had to sell prices started falling quickly.
My call for a bottom in April 2009 was based on a couple of things. First Mortgage rates started to look very attractive. Second the stock market had started a very fast rebound giving people some optimism, but most importantly it was when I finally saw a lot of renewed interest in buying properties. Open houses were much fuller and a lot of the houses that I had been watching that had been on the market forever all started going contract at the same time. So basically sentiment appeared to have changed very quickly and I thought that this would translate to higher prices.
"HB said...
I think 2008 had a lot to do with the economy / stock market. Prices had been falling at over 2% in early 2008, because housing was way overvalued. It then slowed too just over 1%, and I think would have stayed at this level as housing was less overvalued at this point (and the financial system looked safer after Bear Sterns was saved), but then the wold economy started blowing up."
Yeah, I forgot about that & how the timing makes sense (except I think you meant Lehman Bros, not Bear as Bear was 6 mos earlier). Still, you very much could be right about that.
BTW -- I have been playing around with the seasonal aspect of CS from 87 to 2010 to see if I can find anything interesting. I think I have, but im not sure what to make of it yet. When I do, I will probably want to pick your brain again.
Anon-
I think my comment about Bear Stern was correct I was saying housing stopped falling as fast in April 2008, which was right after Bear Sterns was bought by JPM. The housing market started falling apart in September 2008 again which was the month Lehman failed.
If you are able to find anything interesting let me know.
Post a Comment