A "Disappointing" August Case Shiller Misses, Prints 1.7% On Expectations Of 2.1%, Previous At 3.18%, Smallest Since February

Tyler Durden's picture

The very much outdated August Case Shiller Index comes at 148.59 compared to 148.91 previously, a sequential deterioration. The growth is just 1.7% Year over Year, compared to 3.18% in July, and a miss of expectations of 2.1%. This is the smallest Y/Y improvement since February. Look for this index to collapse in October when it is reported in December, once the full impact of fraudclosure is digested.

In the meantime, the downward inflection point in CS is now very much obvious.

From the report:

“A disappointing report. Home prices broadly declined in August. Seventeen of the 20 cities and both Composites saw a weakening in year-over-year figures, as compared to July, indicating that the housing market continues to bounce along the recent lows,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Over the last four months both the 10- and 20-City Composites show slowing growth, after sustaining consistent gains since their April 2009 troughs.

“The month-over-month growth rates tell the same story. Fifteen of the 20 MSAs and the two Composites saw a decline in the month of August as compared to July levels. The 10- and 20-City Composites fell 0.1% and 0.2%, respectively. Indeed, the housing market appears to have stabilized at new lows. At this time, it does not seem that any of the markets are hanging on to the temporary momentum caused by the homebuyers’ tax credits.”

With August data, we find that 15 of the 20 MSAs and both Composites saw prices fall from their July values. Chicago, Detroit, Las Vegas, New York and Washington DC were the only five cities that recorded marginal improvements in home prices over July. The 10- and 20-City Composites were down 0.1% and 0.2%, respectively, in August versus July.

Chicago, Detroit, New York and Washington DC have all posted at least four consecutive months of positive increases in home prices; but none of the MSAs had monthly increases of greater than 1% in August. San Diego, which had posted 15 consecutive months of positive monthly change, recorded a 0.6% drop in average home prices in August. The same is true of Atlanta, Boston, Los Angeles, Miami, Minneapolis, San Francisco, Seattle and the two Composites – they all broke their trend of several consecutive months of positive monthly gains with August’s report.

The table below summarizes the results for August 2010. The S&P/Case-Shiller Home Price Indices are revised for the 24 prior months, based on the receipt of additional source data. More than 23 years of history for these data series is available, and can be accessed in full by going to www.homeprice.standardandpoors.com

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Careless Whisper's picture

case-shiller excludes bank owned real estate... go figure


Slim's picture

Case Shiller excludes more than it includes.  Think how many people did significant remodels or other home improvements in the past decade - all of those are excluded too.

packman's picture

No they're not - read the methodology doc.

Homes may be weighted less if they have a large price swing compared with surrounding homes, e.g. due to a large remodel.  However this is as it should be, and such homes are not excluded, they are weighted less.

The Case/Shiller methodology is actually quite good.


Noumenon's picture

Not true, REO is included when sold.  It just is not included when foreclosed upon:


"The most typical types of non-arms-length transactions are property transfers between family members and repossessions of properties by mortgage lenders at the beginning of foreclosure proceedings. Subsequent sales by mortgage lenders of foreclosed properties are included in repeat sale pairs, because they are arms-length transactions. "


see page 17 on methodolgy



Oh regional Indian's picture

What is the mystery of California's continued strength (relative to their totally ucked reality)? 

LA/SF/SD, up YOY? 5-6-7%? Whut?

Something stinks in Fairyfax.



Bill Lumbergh's picture

My gut reaction would be that speculators are targeting those areas first due to their perceived value as opposed to somewhere like Charlotte.

No One's picture

It could very well be because, especially in L.A., the lower end market has already been oblierated (especially the IE), and the foreclosures and resulting foreclosure sales are slowly moving closer to the ocean.

Oh regional Indian's picture

But if you look at CA's larger dysfunction, which is splashed all over the news, what with IOU's and the like.

Maybe it's not just plain old speculators but manipulators?

Very easy to target certain areas for continued (supposed) growth through a few well placed buys, right? 

I would put nothing beyond the banks.

And then of course there is the Chinese angle, not to be dismissed.



Eternal Student's picture

Kudos, Tyler. You did it again.

I went to ZH, no CS data. Then, it starts dribbling out over the web. Brief summaries here and there. All incomplete. Come back to ZH, and boom, there's all the info, graph and data that I was looking for.

Well done.

Eternal Student's picture

I usually do, if I want the raw data, thanks. Tyler's so quick that I can wait a few minutes for his better presentation and summary.

Bartanist's picture

Reversion to the mean, baby ....

Panafrican Funktron Robot's picture

Looks like they're having trouble stemming the bleeding even on price (actual number of homes sold is a ridiculously small fraction of the 2005 number).  If this number starts printing negative, that's going to be a big big problem.

rivershore's picture


In SW Florida, a non CS area, in September 2010, prices stalled and sales fell.

“I think the September numbers would have been higher if it weren't for the foreclosure mess,” said Drew Peterson, an agent with Re/Max Alliance Group in Sarasota. “I had three or four sales that got extended to mid-November, and I've got to assume that others experienced the same thing.”

Charlotte County-North Port had 241 sales of single-family houses in September, a 1 percent increase from the same month a year ago. Sarasota-Bradenton, had 760 sales, or 3 percent fewer than a year ago. Across Florida, sales were down 8 percent to 13,536.

packman's picture

"Look for this index to collapse in October when it is reported in December, once the full impact of fraudclosure is digested."

Still not sure why it's believed that fraudclosure will have an negative impact on prices.  What am I missing?

Shouldn't it actually have a positive impact, since it'll hold houses off the market?  Econ 101: less supply = higher prices, does it not?

Don't get me wrong - I'm not proposing that housing prices actually will go up.  They will likely still go down from here (since they're still above historic norms).  But it seems like the reason will be the discontinued tax credit and the flattening of mortgage rates - not fraudclosure.


BennyBoy's picture

Econ 101: less supply = higher prices, does it not?


Econ 102: Less supply plus Less Demand = Lower prices

packman's picture

"Econ 102: Less supply plus Less Demand = Lower prices"

In what way though does fraudclosure suppress demand?  It would only suppress demand if people going through foreclosures are part of the demand market - but they're not; you generally can't buy a home right after you're foreclosed on.

I can see Mikla's point below about "uncertainty" somewhat suppressing demand - but that uncertainty only applies to foreclosures, not to non-foreclosure sales, which are still 75% of the market.  Seems to me that fraudclosure may cause demand to be suppressed but only specifically for foreclosures, and it will conversely cause demand to be increased for non-foreclosures.

mikla's picture

The "clear title" issue means non-foreclosure sales *also* may not pass clear title to the new buyer.

If you later find out the seller had no legal authority to sell the house to you, then you're trusting in your Title Insurance, and don't mind the costs associated with moving out.

Vampyroteuthis infernalis's picture

I am guessing that the majority of people being threatened with foreclosure have their houses on the market. The actual result is an increase in demand. If a house is in the process of foreclosure, it is not on the market until the paperwork has cleared and the banks has made it presentable. Thus, supply would decrease temporarily during foreclosure.

mikla's picture

You are correct that banks hold their REO off-market, thus the "dump" hasn't happened.  However, that's the way it's been since 2007 (so you won't see "further restricted supply" going forward).

However, fraudclosure means nobody knows what they are buying.  That's why it will depress prices, *and* depress total number of sales (other than possible wholesale-lot-buying-on-speculation, like is done by the Fed).

Further, fraudclosure is another indicator of the *real* problem:  Houses are just too expensive.  They aren't worth that price, and people have figured that out.  They will revert to (less than) 3x income, and you should expect to see *increasing* unemployment for an extended period (years).  Expect to see continued price drop another 20%-40%, and no, there is no chance they will go up.

Local price fluctuations representing "a good deal" here-and-there will occur (and always occur), but those are "in the noise".

Of course, if you're just a single home-owner, and you want to live *somewhere*, yes, it is possible you can get that "one good deal".  And, it's possible you get screwed for 6x your annual income.  Good luck.

bronzie's picture

"They will revert to (less than) 3x income, and you should expect to see *increasing* unemployment for an extended period (years).  Expect to see continued price drop another 20%-40%"

Martin Armstrong showed a chart in one of his papers - it plots a 26 year cycle in real estate - peak in 2006 - trough in 2032 - he didn't say anything about his methodology for this chart

some of the factors that could cause a 26 year decline are obvious:

- demographics: Boomers downsizing into coffins and urns

- supply vs demand: excess inventory and builders continuing to build

- supply vs demand: shadow inventory

- loss of confidence: clouded titles and uncertainty about ownership

- loss of confidence: increasing unemployment rates and increasing endurance of unemployment for those affected

- loss of confidence: centuries of precedent in property law matters being ignored and overturned

has anyone seen Martin write about the methodology behind his 26 year cycle?

George Costanza's picture

why doesn't anyone on CNBC talk about the second derivative ?  Oh, that's only interesting to them when increasing.   In a normal market, the negative sloped second derivative would crush the market.

packman's picture

"Look for this index to collapse in October when it is reported in December, once the full impact of fraudclosure is digested."

Don't forget Tyler that Case/Shiller is a 3-month rolling average.  Thus the full impact (if there is one - see my point above) wouldn't be seen until December's index, which is published at the end of February.

Grand Supercycle's picture

DOW weekly chart shows the rising wedge contained within the megaphone pattern. This remains a very bearish picture and we should
get a breakout soon.


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