May Case Shiller Composite Misses Expectations, Yearly Drop Biggest Since November 2009

Remember those June calls after April's (yes, two month delayed) Case Shiller report that housing has hit a bottom? Scratch them. The Case Shiller 20 City composite for May (so why anyone even looks at this is beyond us) just came at -0.05% M/M on expectations of an unchanged print, with the previous revised from -0.09% to 0.44%. On a Year over Year basis the 20 City Composite dropped 4.51% on consensus of a -4.50% drop (the previous -3.96% was revised lower to -4.22%) - this was the biggest drop since November 2009. Washington DC was up 1.3% Y/Y (2.4% M/M) and was the only city to gain on a yearly basis. Minneapolis was down the most: 12%. That said there were some modest improvements in several of the regions: “We see some seasonal improvements with May’s data,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “This is a seasonal period of stronger demand for houses, so monthly price increases are to be expected and were seen in 16 of the 20 cities. The exceptions where prices fell were Detroit, Las Vegas and Tampa. However, 19 of 20 cities saw prices drop over the last 12 months. The concern is that much of the monthly gains are only seasonal." Good luck trying to extrapolate data away from seasonal adjustments: "May’s report showed unusually large revisions across some of the MSAs. In particular, Detroit, New York, Tampa and Washington DC all saw above normal revisions. Our sales pairs data indicate that these markets reported a lot more sales from prior months, which caused the revisions. The lag in reporting home sales in these markets has increased over the past few months. Also, when sales volumes are relatively low, as is the case right now, revisions are more noticeable."


On some more recent data:

“Other recent housing statistics show that single-family housing starts were up moderately in June, and are at about the same pace as a year ago. Existing-home sales were flat in June, reportedly because of contract cancellations and tight credit. The S&P/Experian Consumer Credit Default indices showed a continuing decline in mortgage default rates since last winter. Other reports confirm that banks have tightened lending standards in the past year, making it harder to qualify for a mortgage despite very low interest rates. Combined, these data all support a continuation of the ‘bounce-along-the-bottom’ scenario we have witnessed in the housing market over the past two years

The take home:

“While the monthly data were encouraging, most MSAs and both Composites fared poorly in annual terms. Nineteen of the 20 MSAs and the two Composites posted negative annual growth rates in May 2011. The 10-City Composite was down 3.6% and the 20-City Composite was down 4.5% in May 2011 versus May 2010. Minneapolis posted a double-digit decline in annual rate of 11.7%. The only beacon of hope was Washington D.C. with a +1.3% annual growth rate and a +2.4% monthly increase. We have now seen two consecutive months of generally improving prices; however, we might have a long way to go before we see a real recovery. Sustained increases in home prices over several months and better annual results need to be seen before we can confirm real estate market recovery.”

And an announcement that may put Calculated Risk in a fight to retain his charting business model: S&P has just launched Housing Views: its own blog on the housing market.


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