5th Consecutive Month Of House Price Drops As Case-Shiller Misses Expectations Again
The bottom-calling will continue of course but for the fifth month in a row, September's Case-Shiller home price index fell year-over-year as the Non-seasonally adjusted price index fell for the first time month-over-month since February. The overall index dropped 3.9% YoY, compared to expectations of a 3.1% drop. The more narrowly focused 20 City Index also missed expectations, falling 3.59% (relative to expectations of -3.00%). The index value is back below 142 (back at 2003 levels), its lowest in 3 months, as prices muddle along the bottom here with the mix most likely holding us from a more vertical drop. We assume the second derivative crowd will note the -3.9% drop is slower than the -5.79% drop of Q2, but October and November have been tumultuous months and we suspect the acceleration top the downside will revert - especially given recent rises in delinquencies to record highs.
Seasonally adjusted, the 3-month annualized national index is -4.74% (reverting to a drop after Q2's modest gain). The 20-City seasonally adjusted index saw its biggest drop in six months as it drops back to 2003 levels.
Goldman's less than sanguine perspective is hardly going to help sentiment:
Weaker than Expected
BOTTOM LINE: House prices declined more than forecast in September.
KEY NUMBERS:
Case-Shiller 20-city index -0.6% (mom) for September vs. GS +0.2%, median forecast -0.1%.
MAIN POINTS:
1. The Case-Shiller 20-city house price index declined by 0.6% (month-over-month, seasonally adjusted) in September, a larger drop than expected by the consensus. Estimates for earlier months were also revised lower. On a year-over-year basis, prices were down 3.6%. The seasonally adjusted version of the index fell to a new low for the cycle, and prices are now at their lowest level since April 2003 (the non-seasonally adjusted version of the index is still slightly above lows reached in the spring months of 2009 and 2011).
2. Results were mixed across regions. Prices fell sharply in Atlanta (-4.1% mom, seasonally adjusted), and declined in 15 of the 20 cities in the index. House prices continued to rise in Washington DC, where the index is up 1% year-over-year.
Chart: Bloomberg
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Turd polishers ready... set... GO!
Here's the real story as to what is going on with home prices/values courtesy of Calculated Risk.
http://4.bp.blogspot.com/-DvmIW5cdYfA/TqhH_Cc9j0I/AAAAAAAALBw/_4C-8WlAvu...
Now if that chart were inflation adjusted using SGS alternate inflation formula, it would make your head explode.
http://www.shadowstats.com/alternate_data/inflation-charts
I find it interesting that the media isn't really reporting how the declining home prices are effecting the banks.
Wasn't it the collapse of the housing bubble that nearly took down America's banking system in 2008? So why aren't people worried about the banking system now?
'So why aren't people worried about the banking system now?'
Your question presumes that there's a banking system. There isn't. Only looting. Yeah... welcome to the other side.
The FASB (Financial Accounting Standards Board) removed the requirement for banks to mark their assets to market. One can then conclude that the banks are not properly accounting for asset degredation on their balance sheets.
Typically banks first resort to phoney accounting tricks. Second, it appears that the US banks have slowed way down on foreclosures because they actually have to acknowledge the loan as bad and there's no way to hide it (operationalizing hiding the problem).
Lastly, the media isn't going to talk about it, because they could easily spark a run on the bank. From talking to WAMU employees right before the bankruptcy, there was a run on WAMU that finally took the bank down. Remember a "con" is short for someone getting you to misplace your "confidence." Without direct public support, our TBTF banks would likely be bankrupt or nearly bankruptcy. They know it; and yet they still gamble with the public's money.
> Spread your money around to more than one bank that is not in over-its-head. Bankrate.com has a place to start in regard to ranking banks. Front page of the site, about 2/3 way down on the left.
> FDIC has a whopping $7.8 billion to insure depositors.
Feel safe?
When I explain this to people, they think I'm nutz.
When I show/link them this chart,
http://4.bp.blogspot.com/-DvmIW5cdYfA/TqhH_Cc9j0I/AAAAAAAALBw/_4C-8WlAvu...
they don't believe it.
They WANT to believe this Case-Shiller 20 that the Tylers posted above (which is horribly misleading) because it looks as though prices are stabilizing, though bumping around a bit.
And some of these people went to college, of course.
'Spread your money around to more than one bank that is not in over-its-head. Bankrate.com has a place to start in regard to ranking banks. Front page of the site, about 2/3 way down on the left.
> FDIC has a whopping $7.8 billion to insure depositors.
Feel safe?'
I'd just like to go on record saying: I completely disagree with the advice suggested above. Any 'diversification' you should be doing at this point in the game is among Eagles, Maple leafs, etc etc.
Banking needs a serious makeover.
1st National bank of Sealy Posturpedic -- still doing well! :>D
"I find it interesting that the media isn't really reporting how the declining home prices are effecting the banks."
Banks don't care anymore. The taxpayers have been force fed all the worthless MBS via QEx. Of course, The Fed won't tell the taxpayers what they have been forced to pay 100 cents on the dollar for. It would RUIN ALL THAT CONFIDENCE afterall.
I think it's funny that people are rushing to apartments for yield when the shadow inventory right in front of them. I think we are moving back into a depression style era where the new generation is moving back in with their parents, not moving out on their own. This does not bode well for demand. The following is a great analysis discussing the coming "collapse" of apartment pricing.
http://www.ftense.com/2011/11/apartment-prices-ready-to-collapse.html
This is good. Houses need to be 1x-2x the average salary. That means houses going for 50k-100k$. And not crappy houses... average houses with 2 bedrooms.
absolutely, except salaries need to plunge in a default, so house prices should be in the $10-20K range...
How is that going to happen when replacement cost is $150k (once current inventory is gone)?
That is a paradox. The average person can't afford the materials required to build the house of the average person.
Manufactured housing is the solution but Americans are brainwashed into thinking this is not an acceptable solution.
Holes dug in the ground would be even cheaper. Hobbits were smart. We could move the entire population of consumers under ground. I think I read another book where they did that.
Entire ancient underground cities in Turkey: http://en.wikipedia.org/wiki/Derinkuyu_Underground_City
In a credit default the only wealth is cash, and since cash is going to be needed to buy food even the repair and maintenence cost of many homes will be beyond the average family to afford. When these homes come onto the market the values will nosedive once again.
Without credit, homeprices are basically cash, which means a lower priority than the food bill which will rise exponentially...
We are all soon to be renters from sovereign wealth fund landlords, except those of us who buy bullion that is...
Who says real estate is an asset?
Perhaps the book was "Dr. Strangelove" - of course global population was much smaller by the time they all went underground due to the nuclear war.
"You can't fight here, this is the war room!"
How about an entire town?
"That there Clark is an RV"....
...the Shitter's full
Don't go gettin too attached to it, I'm takin it with me when we leave next month...
I'm not sure about that. My uncle built an entire house with green treated wood for fairly cheap. He literally built it himself though. RIP Bob.
Americans are over-housed by many measures (ft2 per person, etc.). As a very gregarious person, I'd like more people (of my choice) in my house. When the SHTF, the good, kind and fun people we currently enjoy as guests will be welcome. I have a racial memory of living in a long house with extended family, brothers in arms, and other tribe members.
Housing prices will not recover for generation. If you check every month for hopeful signs you'll go stark raving insane 20 years too early.
Yes, global growth is dead for quite some time. Even ignoring the oversupply of homes, there are no jobs or income for the purchase of these homes. Overhanging debt and income compression will continue to contract our economies and the prices of housing, for decades. The other possibility is a big war. That would render all predictions to mere speculation.
Let's see:
o Rising property taxes
o Boomers selling unwanted McMansions to the boomer bust (not)
o Interest rates going from 3% back to 8% at some point
o Future wages to be much lower
o Increasing energy costs destroys the "suburban" model
o Fewer families with children
So what's the outlook for housing?
You forgot a 18 million vacant homes, with millions more currently in the foreclosure/pre-forclosure pipeline, and millions more with delinquent mortgages (soon to join the pre-foreclosure/foreclosure pipeline - estimated 2.1 million alone in 2012).
But who's counting...
LOL. Those aren't real.
Concur, though -- I would say 3x the average national wage.
Going back to 1959: Average home price = $12400. Average wage = $3855.80
http://www.thepeoplehistory.com/1950s.html
http://www.ssa.gov/oact/cola/AWI.html
2010 national average wage = $41,673.83
x 3 = $125021.49
The average price of a home in 2010 was $271,600.
This suggests there is still another 50% decline coming - albeit over a few years.
http://www.money-zine.com/Financial-Planning/Buying-a-Home/Average-Home-...
It's quite crazy. In Canada, back in 98, I bought a house for 80k$. It's by a lake. And it has a huge backyard. 3 bedrooms. 2 levels.
But you are not connected to the city water (instead you have a well) and it's only 2 miles from the ``city``... and 15 miles from the big city nearby (2 million people).
It was 80k$ or about 2x the average salary. Today it runs for at least 3 times that. Or 6 times the average salary.
If prices were sane, they would go back to the 2x rule.
"Concur, though -- I would say 3x the average national wage.
Going back to 1959: Average home price = $12400. Average wage = $3855.80
http://www.thepeoplehistory.com/1950s.html
http://www.ssa.gov/oact/cola/AWI.html"
You didn't go back far enough. Try 1939 AHP = $3800, AW = $1730 closer to 2X and closer to the bottom we will hit!
You mean the govt. hasn't figured a way to get a hold of Shiller's data yet?
LOL- good call, CNBC went RIGHT to the second-derivative argument.......
So "second" is the new "first".
So Amerikkka is not number one any more, but it's okay, because of the above metric?
Well, in that case...
We're number two! We're number two!
My number 2 is bigger than your number 2.
Them's fightin' words! (Said in my best hillbillyish accent)
That is the ONE redeeming quality of CNBS. They are so predictably biased that they are, in fact, completely predictable. In other words, they are true to their whoremongering selves... In a pathetic way, that is somewhat honorable.
Know thine enemy.
100% FUBAR.
When you reference CNBC, the third derivative comes to mind: the "Jerk function".
Looks like a pause before another leg down to me.
NOD and preforeclosure stats will likely result in greater inventory, driving down prices. Both have risen dramatically in the 4th qtr for BAC. Question is: When will prices come down enough to level out growing inventory?
2030 or so...
It would appear from that graph that prices are starting to find a range, and in a seasonal cycle.
Just tilt that line downward, since inflation is running at 10% a year. Real home prices are declining 10% a year at a minimum, based on that graph.
Wait a minute... according to The National Bureau of Economic Research, The Great Recession ended in June 2009 - 2.5 years ago. Case and Shiller must be wrong.
It's probably just a glitch in the Matrix.
Theyre right, in a way....sure the Great Recession ended in 2009, but then the Greatest Depression started.
Housing market decline will be the reason for QE3 LSAP MBS 2012 pig feeding fest.
Too bad theyre just feeding on empty calorie fake dollars.
*Messages brought to you by The National Association of Realtors™, Mortgage Brokers Association, National Association of Homebuilders, Your Friendly Municipal Assessor's Office & Flip This Underwater House®.
And don't you dare to be an investor!
Because if you are one of those people who made some money and saved it, you pay even higher taxes on behalf of people that live in the neighbourhood of your investment.
Shit system.
Dont for get the most famous: "The American dream..."
Ken & Barbie had their Malibu Beach Dream House foreclosed on, and it led to a nasty divorce.
Barbie sold the red vette and was last seen methed out, walking the back alleys off Rodeo Drive in a slutfit.
Ken now works for $7 an hour holding a 'Cash 4 Gold' sign 10 hours a day on a street corner in Stockton.
"Sunnyside could be cool & groovy if we all treated each other fair -- it's Lotso -- he built himself a pyramid and put himself on top!" -- Ken, "Toy Story 3" :>D
housing starts are rental buildings
Need another one of those wiz-bang Oblama housing market stim plans...
Judging by yer avatar, you're getting all the stimulus you need by sticking yer fingerz into light sockets! :>D
When the housing market reverts to 1960 price level, then it will flourish.
Until then, meandering near or at the bottom. Or constantly creating new bottoms.
I went in debt for $57,000 buying a new house two years ago. Hell - it WAS cheaper than paying rent, all things considered.
And living in Pittsburgh is cheap. For a reason.
'And living in Pittsburgh is cheap. For a reason.'
My condolences.
Thank you. At least somebody cares. Not enough to send a Hallmark card, but I will graciously accept less-than-very best.
Living in this dumb town is like living in a real-life adaptation of "The Walking Dead". Pittsburgh exemplifies modern-day Amerikkka, and believe me - it's not exemplary.
I believe you. I'm not being a dick, honestly. You... you are the real heroes.
The grimness of modern America became all too real on my last trip there. The supreme irony is that this is precisely what America wishes to 'spread' worldwide, successfully I might add.
Believe me - I didn't think you were being a dick.
I thought you both were being dicks.
/sarc off
This trend begs a few questions:
Will the Fed hold its MBS holdings to maturity?
If not, what is the REAL market value for those MBS holdings and who would buy them from the Fed if the Fed tried to sell them?
100% FUBAR.
I know of one mortgage that will be completed next October -- ours! (YAY!)
Behold a pale horse, and his name who sat on him was Deflation, and QE3 followed with him. - Revelation 6:8
Bible re-writes? Cool.
The patient has flatlined, awsome for us, bad for banks.
Waiting "Creamer" to jump in and call it the bottom. Again.
Housing prices going down, that has to be bullish right?
Highly bulldozerish, indeed!
2003, long way to go. Got to get them back where wage earners can afford them on a $35,000.00 salary. This will take a few more years. And I laugh when citizens complain about the "strict" criteria for buying a home. Sorry, it was like that for 50 years before the squids changed the rules.
That is where we need to be.
Now we have no jobs, and theyre trying to prime the pumps for a $200,000 crackerbox home buying frenzy to come back...LOL...
I keep saying that the rise in PMI rates is a serious drag on the market.
FHA PMI rates have more than doubled since last October. That's roughly an extra $100/month added to the note of a $200k home.
PMI rates? Sure. Just wait until interest rates "recover". It's over.
The FED strategy for QE3 is going to be buy Mortgages. This should keep 30 year down.
Thats the part that makes NO sense...I dont care HOW much the FED prints, theyll never fill the hole their precious MBS 'assets' are in because the more you print the deeper the hole gets, and the R/E bubble will NEVER be reinflated. Dead as the Tulip Craze.
The real estate black hole is too big. It is like King Canute ordering the tide back. There must be a reset or we will continue to make mal-investments and we will never start real reovery.
oh no our houses are zombies! thanks federal reserve.
Incidental to the overall problem of housing prices. No jobs, underwater loans and inflexible banks are the heart of the problem. Not discounting that PMI adds to the problem.
The PMI rate is a drag on the market like increasing lending standards is a drag on the market...
If you have to pay PMI, then you can't afford the house... look for another one or rent.
It really makes no sense to continue paying mortgages that are above the value of the home. This group of jackoffs running these banks need to set mortgages to the present value of the property, get all those who are underwater out of the inequitable status and finally get to a bottom. People will continue to walk and housiing to drop unless these mortgages are reset.
The current situation on a reduction of principal creates a tax sitauion wherein you are required to pay this goverment tax on the reduction is about as stupid an idea as I have ever seen. Got to hand it these politicians, they are as stupid a group as the bankers are courrpt.
This is the part that makes no sense. The FED has been desperately buying up MBS to prop up their main 'asset', mortgages on banks books, yet those prices will NEVER be passed off again, the ridiculous real estate mega bubble is as dead as the Dutch Tulip Craze....theyll never be paid back for it. Yet all they can talk about is MBS purchases as ongoing central part of QE.
Now matter HOW much they print, they can never fill the hole, because the more they pour in of course the deeper the hole gets!
Your plan will not reach the bottom. Prices are going to continue to fall. Those that are underwater today are never getting out, unless they earn their way out. Or run.
Mark to market! Great idea!
Perhaps they should write them down. But most won't for a variety of reasons. But one very big reason is that most were bundled into ABS's that call for revenue to the servicing bank for loans still in the portfolio with no mechanism to reduce the principal without recalibrating the portfolio - to the bank's detriment. Plus, many ABS agreements have loss sharing language that hits the bank's books hardest if the loans are written off (almost no one anticipated principal write-downs in the original ABS agreements). And then there's the bank's fucked up stubborness to recognize the obvious and instead burn through the shareholders equity hoping, hoping, hoping.
Because of government bailouts, the banks have no incentive to modify loans or accept short sales. See Mish's article: Some Failed Institutions Always Foreclose; The Reason: FDIC Sponsored Fraud; Who Benefits: George Soros, Michael Dell, John Paulson; Boycott Dell: http://globaleconomicanalysis.blogspot.com/2011/11/why-some-failed-insti...
Bullish! For! Equities! Dammit!