S&P Case-Shiller Housing Price Index - January 2009

From Standardandpoors.com - "Home Price Declines Continue as the S&P/Case-Shiller Home Prices Indices Set New Record Annual Declines":

Data through November 2008, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, shows continued broad based declines in the prices of existing single family homes across the United States, with 11 of the 20 metro areas showing record rates of annual decline, and 14 reporting declines in excess of 10% versus November 2007.

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The chart above depicts the annual returns of the 10-City Composite and the 20-City Composite Home Price Indices. Following the lead of the 11 metro areas described above, the 10-City Composite matched last month’s record decline of 19.1% and the 20-City Composites set a new record, down 18.2%.

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The chart above shows the index levels for the 10-City Composite and 20-City Composite Home Price Indices. It is another illustration of the magnitude of the decline in home prices over the past two years. As of November 2008, average home prices are at similar levels to what they were in the first quarter of 2004. From their peak in mid-2006, the 10-City Composite is down 26.6% and the 20-City Composite is down 25.1%.

What's happening where?

Monthly data also continues to show a housing market in decline. All 20 metro areas, and the two composites, posted their third consecutive monthly decline. In addition, eight of the MSAs posted their largest monthly decline on record – Atlanta, Boston, Charlotte, Chicago, Dallas, New York, Portland and Seattle. Although in decline over the past few years, some of these regions have out-performed on a relative basis, when compared to the national average. It is clear, however, that the decline in home prices is affecting all regions regardless of geography or employment opportunities.

Dallas and Denver faired the best in November, in terms of relative year-over-year returns. While in negative territory, their declines remained in low single digits of -3.3% and -4.3%, respectively. It should be noted, Charlotte reported its third consecutive largest monthly decline on record, down 1.9%. Denver and Cleveland were the best reporting markets for the month returning -1.1% and -1.2%, respectively. On a relatively positive note, eight of the 20 metro areas recorded better annual returns compared to last month.

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As expected, prices continue to decline and many of the declines have been drastic. We continue to assert that much of this can be attributed to sellers and, more so, banks, getting prices right and moving inventory. As a result, the new comparables are at the lower price points at which these homes have sold at the fire sale pricing. In return, as these sales are recorded we are now seeing these sales being reflected in the steep pricing declines noted in the Case-Shiller report. We've addressed this notion here repeatedly of recent, but it bares repeating since this is what needs to happen to stimulate buyers to buy to move all of this excess inventory. It's not pretty but it has to happen, and the numbers in many recent reports are starting to tell us that this is indeed what is happening.

The latest release of the existing home sales report hints at this notion as there has been an uptick in sales numbers in many locales nationwide. In some of the overheated housing markets (especially in the western region) sales numbers have been trending up year over year. Again, this is a good sign because we need to MOVE INVENTORY before housing is going to find a bottom and start moving in the right direction.

Will this trend continue?