"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Tuesday, January 25, 2011

S&P Case-Shiller Home Price Indices

Home prices are down, pretty much across the board  for November (the most period covered by the most recent report).
As you recall, this is a set of indices looking at the growth rate of home prices in a 10-City area and a 20-City area.  The 10-City Composite fell 0.8% for the month, and the 20-City Composite fell 1.0% for the month.  In fact, out of all the covered Metropolitan Areas, only San Diego saw a month-over-month increase in housing prices, and that was up a bare 0.1%.  Eight markets - Atlanta, Charlotte, Detroit, Las Vegas, Miami, Portland (OR), Seattle, and Tampa - have hit a new low since their peak in 2006-2007.
On the up side, this means it is a buyer's market (assuming you can get a mortgage).  On the down side, this means falling municipal revenue[1], which casts further doubt on the stability of the municipal bond market.  Also, this is a pretty strong indicator that new and existing home sales are soft.  Prices tend to fall as supply increases, and supply (in homes) increases directly as new homes are completed and existing homes are put on the market.
Or, as the report puts it, "With these numbers more analysts will be calling for a double-dip in home prices.  Let's take a moment to define a double-dip as seeing the 10- and 20-City composites set new post-peak lows.  The series are now only 4.8% and 3.3% above their April 2009 lows, suggesting that a double-dip could be confirmed before Spring."
[1]  Most municipalities have property taxes as their number one source of revenue.  If home prices are falling, people will have their properties reassessed in order to pay less in taxes.

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