Case-Shiller Index Resumes Decline Following Small Gain To End 2014

Weather-crushed January saw seasonally-adjusted Case-Shiller home prices - and as a reminder Case-Shiller expressly warns not to use seasonal data but opts for raw, unadjusted reporting - rise 0.87% MoM (better than expected), slower than the revised 0.91% gain in December. However, away from the 'make-everything-feel-better' adjustments, home prices slipped in January following December's brief interlude, leaving the index down 4 of the last 5 months. Of course, it goes witghout sayiung that weather was blamed, as they suggest, "unusually cold and wet weather may have weakened activity in some cities." What is more worrisome however, and farcical, is Case-Shiller's ominous warning against rate hikes, "home prices are rising roughly twice as fast as wages, putting pressure on potential homebuyers and heightening the risk that any uptick in interest rates could be a major setback."

Following December's blip, January resumed the falling trend...

 

Without the seasonal adjustments that make everything feel better: in fact a flat line is the best the market can hope for.

 

As Case-Shiller note,

“The combination of low interest rates and strong consumer confidence based on solid job growth, cheap oil and low inflation continue to support further increases in home prices” says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices. “Regional patterns in recent months continue: strength in the west and southwest paced by Denver and Dallas with results ahead of the national index in the California cities, the Pacific Northwest and Las Vegas. The northeast and Midwest are mostly weaker than the national index.

 

“Despite price gains, the housing market faces some difficulties. Home prices are rising roughly twice as fast as wages, putting pressure on potential homebuyers and heightening the risk that any uptick in interest rates could be a major setback. Moreover, the new home sector is weak; residential construction is still below its pre-crisis peak. Any time before 2008 that housing starts were as low as the current rate of one million, the economy was in a recession.”

As for the breakdown by MSA, San Francisco is back to being the laggard, seeing a 0.9% drop sequentially.

From the report:

Of the nine cities that reported increases, Charlotte, Miami, and San Diego led all cities in January with increases of 0.7%. San Francisco reported the largest decrease of all 20 cities, with a month-over-month decrease of -0.9%. Seattle and Washington D.C. reported decreases of -0.5%.

Clearly the west coast is in desperate need of more PBOC easing and a return of the Chinese buyer.