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Today’s Case-Shiller report showed that the composite index of home prices in 20 metropolitan areas rose 1.2% month-to month in August, above the consensus estimate of a 0.7% increase.  The magnitude of the increase, however, declined on a sequential basis for the first time in four months.  In July, the index improved 1.6% month-to-month.  Nonetheless, the rate of annual decline in home price values continues to improve. 

The question about whether these trends will continue to show sequential improvement rests on the upcoming November 30 expiration of the government's $8,000 tax credit for first-time home buyers.  Also impacting these housing numbers are the anticipated higher unemployment rates through year-end and the apparent trend toward lower consumer confidence numbers, which was more evident today following the disappointing conference board reading. 

These issues, coupled with a new wave of foreclosures hitting the housing market in early 2010, suggest that the improvement in pricing trends are sure to slow down and may even begin to deteriorate further.

As always, any discussion about Case-Shiller needs the disclaimer that the data we are looking at is for August 2009.  The more recent data that we have seen from the homebuilders and the housing market in general suggests that the trend is slowing.    Two weeks ago, it was reported that the National Association of Homebuilders housing market index dipped to 18 in October from 19 in September, falling below market expectations for a reading of 20.  While the index has improved significantly from the January 2009 reading of 8, it is only up from 14 in October 2008. 

In short, our current view on housing has not changed - Given the pace of new homes being built, the current inventory of unsold homes and the potential number of homes that are in distress is likely to increase.  Put simply: the housing overhang is here to stay. 


Howard Penney

Managing Director



EYE ON HOUSING PRICES - caseshiller1