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U.S. home prices as measured by the S&P Case-Shiller 20-city home price index fell by a smaller than expected 13.3% year-over-year to a level of 144.23 in July.  The consensus economist view was expecting prices to fall by a larger 14.2% year-over-year.  Looking at the month-to-month trends, the 20-city home price index rose 1.6% for the month after increasing 1.4% in June.

Case Shiller is a very important data point when looking at the health of the housing market, and we used it successfully early in the year to call the bottom in the housing market.  It is important to understand, however, that by the time of release the data is so old that it is primarily relevant as a historical trend indicator.   

As such, the data that was reported today is a lagging data point – it is July data - and we are in September.  To that end, it really shows the rear-view that people are imputing into the forward look for equity prices: Bullish confidence that the worst is behind us.

While it is too early to get bearish on the marginal change in housing, we are getting closer.  To give you a preview for one of our themes as we look toward 2010 is a bearish stance on housing.  We will continue to monitor how things progress, but the acceleration in month-to month trends should begin to slow at the end of 1Q10.

Howard Penney

Managing Director

HOUSING: Euphoria is getting priced in! - hp1a

HOUSING: Euphoria is getting priced in! - hp2b