Tuesday, March 31, 2009

Case-Shiller released seasonal worst month of year

The Case-Shiller data for January was just released. Normally, the fastest price drops of the year happen in this data set. Now, for Florida and maybe a few other places, it looks like February could be worse; but for most areas we expect slower price drops until November.

So expect your favorite Realtor (tm) organization to state how much the market is improving.

Since Calculated Risk does a much better job of documenting the big picture, I focus on the last 3 cities that held their Case-Shiller above 200: Los Angeles, Miami, and DC.

I believe the derivative provides even more information than the absolute number. Notice the seasonality? The greatest drops are October-February. Suddenly for march the slope changes, pretty much every year and I do not expect an exception for 2009. However... I still expect the overall year to be negative. Loan rules keep being rewritten.

I also wonder when the black hole of 'off the market foreclosures' will be relesed. Sorry... but I know of too many people who haven't made a payment in 9+ months. When the time comes, they'll move back in with mom and dad. Too many bedrooms for too little income.

What is it with journalists pointing that the price declines are easing in LA?!? A 2.87%/month price decline might be less than the peak of a year ago, but it points to a bottom in 2011, not even 2010!

Now I'll do a caviat. You could see miniscule price increases, per Case-Shiller in May-August. But... they will be given up in the winter.


yeahoo article

Oh, any price increases will require the job market to stop sucking. Do you think that will happen? Historically, the price bottom is about 12 to 18 months after the employment bottom (or when employment is starting to rise again).

Thankfully, unless there is a huge surprise to the downside, I think we're starting to come to the end of the worst of this recession. Now when are we going to fix the trade deficit? We have to (again, as we did for a little time under Reagan). By trade deficit I mean oil and goods (China). Not to mention, its going to be 7 years before easy credit rears its ugly head again (and it won't be as easy for 70+ years).

Got Popcorn?


The Anonymous said...

Have you checked your tiered index yet? In DC it looks like the high end rate of decline is decelerating (YOY) while the low end is accelerating (YOY) quite a bit.

BTW glad to see you are back to posting!

Westside Bubble said...

I'm struck with how symmetrical the Case-Shiller is this time, in contrast to the 1990 peak (graph).

Per their Methodology, "The indices are calculated monthly, using a three-month moving average algorithm. Home sales pairs are accumulated in rolling three-month periods, on which the repeat sales methodology is applied. The index point for each reporting month is based on sales pairs found for that month and the preceding two months. For example, the December 2005 index point is based on repeat sales data for October, November and December of 2005."

This much smoothing may prevent any temporary short uptick mid-year.

The Anonymous said...

Westside, FWIW - since people started noticing the seasonality of prices, Case Shiller has recently come out with a seasonally adjusted index as well.


Honestly, I wish more people would cite and grap this version so we could determine what price changes are real and what is just seasonality.

However, since the non seasonally adjusted version is so well known and covered, I doubt we will see a widespread switch.

The Anonymous said...

Neil - interesting research paper on how your LA "equity locusts" helped to infect places like Phoenix and Las Vegas with the bubble. Enjoy


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