S&P Case Shiller Home Price Index Sinks

By Markos N. Kaminis - Economy & Markets

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The S&P Case Shiller Home Price Index noted deteriorated prices again in August. While it would be more relevant to know how October fared, or even September, the downtrend continued in this latest reported period. However, recent reports on September New and Existing Home Sales have offered signs of stabilization. Ironically though, in this case, the older data might actually offer the more trade-useful information.

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Home Prices

While the year-to-year declines of 17.7% and 16.6% for the 10 and 20 city composites, respectively, are troubling, we view the monthly change a more useful barometer now. In this case, however, the message isn't any different. Prices fell 1.0% in August for the 20-region aggregate.

Foreclosures continue to play a big role in general price decline. As a result, we would look toward a point of sincere foreclosure inventory reduction, in order to confidently anticipate general price stabilization.

Two regions of the twenty counted by the index posted price increases, Cleveland (+1.1%) and Boston (+0.1%), while San Francisco noted the greatest decline (-3.5%). New York area prices fell 0.2%, after declining 0.7% in July. Year-to-year, markets in Phoenix and Las Vegas have seen the greatest drops, down 30.7% and 30.6%, respectively. The markets least impacted were found in Dallas and Charlotte, down just 2.7% and 2.8% on the year, respectively.

New Home Sales

Yesterday, New Home Sales were reported running at an annual pace of 464K in September, up from 460K in August. The result also exceeded consensus expectations for 450K. Also noteworthy, the direction of change matched last week's Existing Home Sales data for September. Running at a pace of 5.18 million, home resales exceeded expectations for 4.92 million, and represented improvement from 4.91 million in August.

Why Old News Matters This Time

Normally, we would render meaningless the older information, but this time around the old news is incidentally also likely to be more useful. The basis of our point is best illustrated through notation of today's Consumer Confidence Index report. The Conference Board's October measure of consumer sentiment showed dramatic deterioration to 38.0, from an already bad September point of reference (52.0).

While housing collapse started this mess, the consumer cycle it helped set in motion appears about ready to lap it and bite housing in the rear. As consumers lose confidence, that large purchase of a home becomes even less likely than smaller spends. Tighter lending constraints only exacerbate that reality.

Today's ICSC Weekly Same-Store Sales data showed year-to-year growth of 1.3%. While better than the prior week level of 0.9%, sales remained relatively soft.

ICSC Sales Trends
Week Ended	Yr/Yr Growth	Wk/Wk Growth
Oct 25	+1.3%	+0.5%
Oct 18	+0.9%	-1.6%
Oct 11	+1.0%	+0.7%
Oct 4	+1.3%	+0.1%
Sep 27	+1.1%	-0.2%
Sep 20	+1.3%	-1.0%
Sep 13	+1.3%	-1.6%
Sep 6	+1.9%	-0.1%
Aug 30	+2.2%	+0.1%

The point is that as the initial drivers of real estate market decline age, a more powerful driver of demand, consumer confidence and spending, will likely wane. Therefore, prices and sales face ongoing obstacles, and market recovery is likely to be delayed.


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