5th Consecutive Month Of House Price Drops As Case-Shiller Misses Expectations Again

Tyler Durden's picture

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.

Case-Shiller 20-city index -0.6% (mom) for September vs. GS +0.2%, median forecast -0.1%.

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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GeneMarchbanks's picture

Turd polishers ready... set... GO!

flattrader's picture

Here's the real story as to what is going on with home prices/values courtesy of Calculated Risk.


Now if that chart were inflation adjusted using SGS alternate inflation formula, it would make your head explode.


midtowng's picture

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?

GeneMarchbanks's picture

'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.

FlyPaper's picture

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?


flattrader's picture

When I explain this to people, they think I'm nutz.

When I show/link them this chart,


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.

GeneMarchbanks's picture

'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.

StychoKiller's picture

1st National bank of Sealy Posturpedic -- still doing well! :>D

Alex Kintner's picture

"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.

Future Tense's picture

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.


lolmao500's picture

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.

Harlequin001's picture

absolutely, except salaries need to plunge in a default, so house prices should be in the $10-20K range...

HelluvaEngineer's picture

How is that going to happen when replacement cost is $150k (once current inventory is gone)?

Thomas's picture

That is a paradox. The average person can't afford the materials required to build the house of the average person.

HelluvaEngineer's picture

Manufactured housing is the solution but Americans are brainwashed into thinking this is not an acceptable solution.

Spastica Rex's picture

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.

Harlequin001's picture

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?

TheMerryPrankster's picture

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!"

fonzanoon's picture

"That there Clark is an RV"....

WonderDawg's picture

Don't go gettin too attached to it, I'm takin it with me when we leave next month...

tarsubil's picture

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.

gaoptimize's picture

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.

Bicycle Repairman's picture

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.

Smiddywesson's picture

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. 

Bicycle Repairman's picture

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?

TruthInSunshine's picture

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...

island's picture

Concur, though -- I would say 3x the average national wage.

Going back to 1959:  Average home price = $12400.  Average wage = $3855.80




island's picture

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.



lolmao500's picture

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.


automato's picture

"Concur, though -- I would say 3x the average national wage.

Going back to 1959:  Average home price = $12400.  Average wage = $3855.80






You didn't go back far enough. Try 1939 AHP = $3800, AW = $1730 closer to 2X and closer to the bottom we will hit!

Everybodys All American's picture

You mean the govt. hasn't figured a way to get a hold of Shiller's data yet?

jcaz's picture

LOL-  good call, CNBC went RIGHT to the second-derivative argument.......

Tsar Pointless's picture

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!

knukles's picture

My number 2 is bigger than your number 2.

Tsar Pointless's picture

Them's fightin' words! (Said in my best hillbillyish accent)

John Law Lives's picture

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.

Dr. No's picture

When you reference CNBC, the third derivative comes to mind: the "Jerk function".

CvlDobd's picture

Looks like a pause before another leg down to me.

prodigious_idea's picture

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?

firstdivision's picture

It would appear from that graph that prices are starting to find a range, and in a seasonal cycle. 

Kickaha's picture

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.

Granangry's picture

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.

a growing concern's picture

It's probably just a glitch in the Matrix.

SheepDog-One's picture

Theyre right, in a way....sure the Great Recession ended in 2009, but then the Greatest Depression started.

slaughterer's picture

Housing market decline will be the reason for QE3 LSAP MBS 2012 pig feeding fest.