Dennis Norman
This morning the S&P/Case-Shiller Index report for August was released showing that home prices in the 20 cities covered by their report fell 11.3 percent in August from a year ago. This is a smaller year over year decline than July when the index showed a 13.3 percent drop in home prices from a year earlier and in fact is the smallest year-over-year price decline in the 20-city composite index since February 2008 when it was 12.71 percent.
Source: S&P/Case-Shiller Home Price Index
I like the S&P/Case-Shiller Index and feel it is one of the more accurate ways to measure what is happening to home prices in the metro areas covered by their report and, since they cover the major metros, a fairly good reflection of what is going on in the U.S. housing market as a whole. One of the things I like is they are actually tracking sales prices of the same homes through time, therefore truly an “apples to apples” comparison of home values. Many economists, including those at the National Association of REALTORS(R) track median home prices and base changes in home prices upon median prices. Personally I feel median home prices can be skewed for a time period by an influx of sales of lower-priced, or higher-priced homes. For example, the last couple of months have seen a big run-up in sale of first-time home-buyer homes as a result of the tax credit. I would suspect this will end up bringing down the median home prices although it doesn’t mean that home prices dropped, just that a bunch of lower priced homes sold during the period.
Having said that, NAR does take into account home sales from throughout the country when doing it’s reports so they are taking in a much more diverse market than the S&P/Case-Shiller reports do. NAR’s reports for August were not far off from those of S&P/Case-Shiller, showing median home sale prices in August were 12.5 percent below the year before. NAR’s year-over-year price decline in August was the lowest since March, 2009 and then dropped even further in September supporting a “bottoming out” of prices.
I think it is encouraging that both reports I’ve discussed are indicating a leveling-out of home prices in the U.S. however I think there are still factors out there that could affect prices going forward including:
- Record numbers of foreclosures
- Record numbers of mortgage delinquencies
- Unemployment
Another concern that has been raised by some people is the fact that in their opinions lending standards are still loose and are going to set up the next giant wave of defaults and foreclosures. If you want a real in-depth look at this check out the post by Charles Hugh Smith.
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