Tuesday, June 29, 2010

Case-Shiller Reports Highest Yearly Gain Since 2006

Highlights of today's Case-Shiller report for April home prices:

1. Annual growth rates of all 20 MSAs and the 10- and 20-City Composites improved in April compared to March 2010.

2. The 10-City Composite is up 4.6% from where it was in April 2009, and the 20-City Composite is up 3.8% versus the same time last year (see top two charts).  These two year-to-year improvements were the highest annual percentage gains since September 2006.  

3. 18 of the 20 MSAs and both Composites saw improvement in prices as measured by April versus March monthly changes.

4. The strongest year-to-year price gains were in California, with San Francisco leading the 20 MSAs with an 18% increase from April 2009-April 2010, followed by San Diego (11.7%) and Los Angeles (7.8%).  Strong gains were also reported for Minneapolis (9.5%), Washington D.C. (7.3%), Cleveland (6.8%) and Phoenix (5.5%), see table above (click to enlarge).     

5 Comments:

At 6/29/2010 2:11 PM, Anonymous Anonymous said...

How valid is this in Metro Detroit area. You will find a major city Detroit with thousands of properties changing hands for less than 10k and most of the suburbs are totally diff world. In Novi, Troy,Bloomfields,Birmingham you see properties are worth more than half a million to million dollars easily.

 
At 6/29/2010 2:15 PM, Anonymous morganovich said...

"This is the first monthly increase after six straight declines. David Blitzer, chairman of the index committee at Standard & Poor's, attributed the price increase to the rush of buyers seeking to take advantage of expiring tax credits. Listen to an interview with S&P's Blitzer.

Since the tax credit expired on April 30, other housing data for May has confirmed a sharp decline in activity.

"Prices are likely to follow demand, so we expect this index to trend weaker in coming months," wrote Josh Shapiro, chief economist at MFR Inc., in a note to clients. "

 
At 6/29/2010 2:57 PM, Anonymous gordon gecko said...

Greed is not good.

 
At 6/29/2010 3:19 PM, Blogger Junkyard_hawg1985 said...

Mark,

I am still very skeptical of a rebound in housing. Here are my reasons:

1) This improvement in the average selling price was largely caused by an $8000 tax credit on 47% of the homes bought in April. If someone else is paying $8000 of the price, you are willing to pay more overall. At least this is the argument that you frequently make about healthcare and tuition.

2) The average selling price of a home is still at 4.3X median household income. While this is a great improvement, it is still above the long term average. Typically for a true secular bear market, it overshoots to reach bottom, not revert to the mean.

http://www.ritholtz.com/blog/wp-content/uploads/2010/06/Median-Prices-v-Income.png

3) There is still significant overhang in the housing inventory. In addition to normal housing inventory (homes for sale), there is significant inventory of unoccupied home held off the market. According to the Census Bureau, the unoccupied rental properties and single homes are near historic highs. This excess inventory must be cleared before a significant long term improvement in home prices can be obtained.

http://calculatedriskimages.blogspot.com/2010/06/obama-house-inventory-june-2010.html

4) The debt to equity ratio on housing in the U.S. is around 200%. Prior to the recession, it had never been over 100%. Historically, the debt-to-equity has been around 67%. The reason the current number is so bad is there is around $10T in mortgage debt on $15T in housing for a net equity aroung $5T. Since about 1/3 of homes are owned free and clear, this means the rest of America owes as much on their homes as they are worth (no net equity). This will have to be corrected before sustainable growth in home prices.

http://endoftheamericandream.com/wp-content/uploads/2010/05/Residential-Mortgage-Debt.png

Based on the length of typical secular bear markets, this should all be cleared out around 2023.

 
At 6/29/2010 3:25 PM, Anonymous Soaring Eagle said...

First, the 20 city CS is not an accurate reading of the real estate market in this country. There are over 40,000 zip codes, and in any zip area you might have some prices going up and some down.

Location is critical and all important. Some of the 20 CS markets are "basket cases" such as Detroit, Miami, Las Vegas and so forth.

They are just not a good gauge but VERY GENERALLY.

Take the NFL, and judge the league by the performance of only 2 teams in the largest 2 cities. What would be ones conclusion on who to "bet on" the following week??

 

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