When I sat down to write this article, my intent was to show how a bunch of different markets were progressing on their own. Instead I took the derivative of the Case-Shiller home vales and saw how the western markets are marching to their doom together. Similar percentage drops in value per month! Note that I've inverted the y-axis. A higher value means that the market is losing value faster. Notice a trend? We're no longer bleeding 'value' out west, its a regional flood!
Note: this data is averaged over three months with a two month lag in data reporting.
How can one explain how these five large metropolitan areas are moving in concert? Only Las Vegas seems to have done a little early jump in equity evaporation. Now they are falling together as if jointly pushed off a cliff.
These regions are now losing 3.0 to 3.5% of equity per month! All of them! Now I have to note a mistake on my part: I thought the peak equity loss for these cities would be 2.5% of the homes 'value' per month. So the question is, will the rate of home value lost, expressed as a percentage of the current home value, turn over toward the 2.5% I have been predicting for a long time? Or will we see a break away? I'm very curious to find out.
What about other regions?
DC is an interesting market. It, like the conjoined western markets, is a large metropolitan area. Its been slowly bleeding equity for a bit. But notice the uptick. Has it decided to join its western friends?
Why is this happening? Supply and demand. Here is the latest national inventory chart:
We now have an acceleration in the loss of home values across all of the metropolitan areas tracked by Case-Shiller. It appears that this equity evaporation is starting to go in phase but is not yet nationally falling at the same rate. Obviously, this is due to the tightening of the credit market. Now what's going to happen when the employment market weakens?
Got popcorn?
Neil
