Tuesday, August 31, 2010

Case-Shiller Home Price Indexes Highest Since '08

New York, August 31, 2010 – "Data through June 2010, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index rose 4.4% in the second quarter of 2010, after having fallen 2.8% in the first quarter. Nationally, home prices are 3.6% above their year-earlier levels.

In June, 17 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were up; and the two composites and 15 MSAs showed year-over-year gains. Housing prices have rebounded from crisis lows, but other recent housing indicators point to more ominous signals as tax incentives have ended and foreclosures continue.  In June, the 10-City and 20-City Composites recorded annual returns of +5.0% and +4.2%, respectively."

MP: Both the Composite-10 and Composite-20 Home Price Indexes reached their highest levels in June since December 2008. 

34 Comments:

At 8/31/2010 10:19 AM, Blogger juandos said...

Over at Pragmatic Capitalism there's this posting: THE DETERIORATING MACRO PICTURE

Note this line from that article: "The housing boom created what was in essence a massively leveraged household sector. The problems were compounded by the leveraging in the financial sector, however, this was merely a symptom of the real underlying problem and not the cause of the financial crisis (despite what Mr. Bernanke continues to say and do to fix the economy)"...

 
At 8/31/2010 10:35 AM, Blogger juandos said...

One more thing that might impact this Case-Schiller index for what its worth...

From Mish's: Burning Down the House; New Home Sales Consensus 330K, Actual 276K, a Record Low; Nationwide, Zero New Homes Sold Above 750K

 
At 8/31/2010 11:19 AM, Blogger morganovich said...

this was only through june and is a 3 month average, which means it was still heavily influenced by the tax credits and has not yet seen the effects of the huge july slowdown.

q2 was the first positive year on year comparison since 2007. it was already fading in june, and it's doubtful that prices will be sustained in a volume drop as sharp as july.

even the CS report itself carries this language in the first paragraph:

"Housing prices have rebounded from crisis lows,
but other recent housing indicators point to more ominous signals as tax incentives have ended and
foreclosures continue."

 
At 8/31/2010 1:56 PM, Blogger marmico said...

Pretty Boy Perry on the housing market from 3 years ago. Just the facts. The facts have changed but Pretty Boy hasn't. So be it.

Nice, eh. No ideological driven drivel from juandos in sight. Juandos aka "1" destroyed your blog, Perry. There is no room for intellectual rigour here, just room for picking up crumbs and piling on from the CATO floor, a juandos specialty.

What's the name of your alter ego now, "1"? I think it's Paul you friggin' prick.

 
At 8/31/2010 5:54 PM, Blogger morganovich said...

excellent article on why CS is a lagging indicator and what to look for on coming months:

http://www.calculatedriskblog.com/2010/08/on-case-shiller-house-prices-october-is.html

 
At 8/31/2010 5:55 PM, Blogger morganovich said...

hey, juandos -

clearly, it's possible to embed url's in there comments as hyperlinks, as you do it all the time.

how do you do it?

thanks.

-m

 
At 8/31/2010 6:09 PM, Blogger PeakTrader said...

The government should've done something constructive, e.g. place a floor on home prices (perhaps 90% of 2005 market values). That way good homeowners wouldn't have to become good renters.

If the U.S. economy has the capacity to build 2 million houses a year, why are we building 300,000 a year? I doubt laid-off construction workers will become microbiologists or biochemists anytime soon, and entreprenuers aren't creating enough jobs for the millions of people laid-off in housing-related jobs.

Why is a 70% homeownership rate too high, and why can't many more Americans own two or three houses? Are we better off with idle resources for several years or a decade?

 
At 8/31/2010 7:37 PM, Blogger morganovich said...

peak-

place a floor on home prices? are you channeling seth?

what happens when you overprice a product?

it doesn't sell.

if you want to boost home ownership, you need new buyers. fixing prices at high levels would drop home ownership. first time buyers would find them out of reach.

can you seriously be arguing that fixing prices at high levels will increase home ownership?

would fixing the price of cars at high levels increase auto ownership?

even if we assumed for a minute that a price floor was a good idea, how would you do it? the government can't buy up all the surplus houses. that's too expensive and doesn't solve the problem. you'd just rent from them and not the bank.

so what, pass a law dictating for what you can sell a house? that's unconstitutional. FDR's 1933 recovery act got shot down for trying just that sort of thing.

 
At 8/31/2010 7:57 PM, Blogger PeakTrader said...

Morganovich, checking deposits are insured up to $100,000. Why not home price insurance also?

If your house is sold below 90% of its value, the government, for example, can send you a check for the difference.

Houses are typically a slow appreciating asset, not a steep depreciating asset, like autos.

Anyway, the point is to refund money to households, promote economic growth, and maintain the homeownership rate.

 
At 8/31/2010 8:09 PM, Blogger PeakTrader said...

Bank deposits are insured up to $250,000 now.

 
At 8/31/2010 10:04 PM, Blogger Ron H. said...

"If your house is sold below 90% of its value, the government, for example, can send you a check for the difference."

Peak, this has to be one of the worst ideas I've ever heard of.

Please don't ask for MORE government interference in the housing market. They've done enough damage already. Besides, the government is broke, remember?

What you are suggesting would let house prices drop like stones, as no one would have any incentive to ask for as much as they could get. any low price would be OK, as taxpayers would make up the difference. The number of ways to abuse such a system is mind boggling.

How would I calculate the "value" of my home, considering that all value is subjective? Is it the comp price in 2006? The price I paid in 1991? Just what?

 
At 9/01/2010 2:33 AM, Blogger PeakTrader said...

Ron, there are good, bad, and roughly neutral government policies. We've seen many bad government policies over the past two years, which left the American people broke, unemployed, homeless, and with a huge bill.

A few simple rules can minimize fraud, e.g. 10 bids through three mortgage firms, with the highest bid getting the house, a waiting period of five years to resell a house (to collect insurance), etc.

There are people today, who are buying houses at half off or very cheap (homeowners and banks lose), fixing them up, and selling them for profits.

If your house was worth $500,000 in 2005 (e.g. appraised value) and you sell it at $400,000, the government can send you a check for $50,000. Then 90% of $400,000 is insured.

It could be a temporary policy, e.g. for 10 years, to stabilize housing prices.

 
At 9/01/2010 2:56 AM, Blogger PeakTrader said...

Or the $50,000 could be in the form of a voucher, for a down payment on another house.

 
At 9/01/2010 5:32 AM, Blogger Paul said...

"There are people today, who are buying houses at half off or very cheap (homeowners and banks lose), fixing them up, and selling them for profits."

Peak,

I'm one of those people, except we're buying them usually at far less than half the peak value. Are you saying this is a bad thing?

 
At 9/01/2010 8:21 AM, Blogger morganovich said...

peak-

bank deposits are cash. that's not that same as a physical asset.

you are arguing that higher prices will increase demand.

who would provide this magic asset guarantee?

how about we guarantee that stocks can never go down too? that way we'll all have plenty of money to retire.

 
At 9/01/2010 8:30 AM, Blogger juandos said...

Hey morganovich, try this page out: Links to the World: Internet Sites

Using what's on that page the url you put in your comment would look like this: On Case-Shiller House Prices: October is the "Witching Hour"

 
At 9/01/2010 12:51 PM, Blogger VangelV said...

Mark. I am amazed how often you try to sell the housing recovery story even when the data is showing that there are huge problems for the housing market ahead. The shadow inventory is huge and income growth and employment are insufficient to support the current price levels. This means that housing activity can only approve if there is more intervention and that nominal prices can increase only if the currency loses more purchasing power.

Isn't it time that you looked at the economy and housing markets as they were rather than as you wish them to be? And if you are correct aren't there much better ways to make money than by looking at housing?

 
At 9/01/2010 2:24 PM, Blogger juandos said...

Well this is an interesting though not unexpected situation courtesy of the Tax Foundation...

All over the country the housing prices have slipped some and yet guess what?

Property Tax Collections Increased Despite Decline in Home Values

From 2007 to 2008, State and Local Property Tax Revenues Increased 4 Percent Nationwide

 
At 9/02/2010 2:21 AM, Blogger Ron H. said...

"We've seen many bad government policies over the past two years, which left the American people broke, unemployed, homeless, and with a huge bill."

Let's focus on eliminating those bad policies to help prevent problems in the future. Let's not add more interference from government.

"A few simple rules can minimize fraud, e.g. 10 bids through three mortgage firms, with the highest bid getting the house, a waiting period of five years to resell a house (to collect insurance), etc."

What if I only get 2 bids?

Who will administer this? More government bureaucracy? No thanks.

"There are people today, who are buying houses at half off or very cheap (homeowners and banks lose), fixing them up, and selling them for profits."

Peak, I think that's called free enterprise. I, for one, am in favor of it.

"If your house was worth $500,000 in 2005 (e.g. appraised value)..."

My house wasn't appraised in 2005, and there were few comp sales in the neighborhood. My friend the appraiser would probably boost this to $600k if I bought his lunch. More room for abuse. Any guess at it's value in 2005 is highly subjective. There is no absolute value for houses.

"...and you sell it at $400,000, the government can send you a check for $50,000. Then 90% of $400,000 is insured."

I think you mean 90% of $500k. Some of that $50k is YOUR money, you know. You don't have a problem helping someone pay for my house?

"It could be a temporary policy, e.g. for 10 years, to stabilize housing prices."

Peak, you KNOW how those 'temporary' policies work.

Why is it government's job to stabilize housing prices? How about stock prices? Should government try to stabilize those also?

Personally, I don't want money taken out of my pocket to help people who made bad choices. I'm not sure why you think it's OK to spend taxpayer money on something like this. Our goal should be LESS government, not more.

 
At 9/02/2010 3:53 AM, Blogger PeakTrader said...

Ron, you got your "free enterprise" result. Millions of Americans lost their homes and jobs. So, we're now building 300,000 houses a year instead of 2 million. Afterall, Americans spent and borrowed "too much," because prices and interest rates were "too low."

The government shouldn't prop-up the economy. We should've washed out everyone except the strongest households and started over. Housing doesn't need price insurance like the stock market doesn't need put options or stop losses.

 
At 9/02/2010 7:50 AM, Blogger VangelV said...

Ron, you got your "free enterprise" result. Millions of Americans lost their homes and jobs. So, we're now building 300,000 houses a year instead of 2 million. Afterall, Americans spent and borrowed "too much," because prices and interest rates were "too low."

What "free enterprise?" The US government was pushing home ownership and forcing banks to lend money to people who could not afford to own homes. The government protected ratings agency oligopoly was giving AAA ratings to junk paper. The highly regulated banks were permitted to play games by using mark to fantasy accounting tricks. The mortgage market was dominated by the GSEs. The Fed was pumping liquidity into the system to promote the housing bubble. There clearly was no free market and you know it.

The government shouldn't prop-up the economy. We should've washed out everyone except the strongest households and started over. Housing doesn't need price insurance like the stock market doesn't need put options or stop losses.

This is sensible. The government should not interfere with any markets. If it stayed out of the way bubbles would be local, much smaller, and would not threaten the entire real economy.

 
At 9/02/2010 8:26 AM, Blogger PeakTrader said...

VangelV, the free enterprise to look for a job and when you can't find one buy cheap houses, fix them up, and sell them.

Anyway, sounds like a bunch of elitist talk: Americans consume and borrow too much, good renters make bad homeowners, it's sensible to wash-out everyone except the strongest households, turn a recession into a depression, etc.

And I'm sure some want to continue blaming Bush, Wall Street, and corporate greed.

 
At 9/02/2010 11:37 AM, Blogger juandos said...

PeakTrader says: "Ron, you got your "free enterprise" result. Millions of Americans lost their homes and jobs"...

A question here PT, how many of those 'free enterprise' jobs were lost due to excessive regulatory costs imposed by local, state, and federal government?

PT says: "Afterall, Americans spent and borrowed "too much," because prices and interest rates were "too low.""...

How about a dose of irony here courtesy of the Business Insider?

No, Seriously, NOW Is The Time To Buy Your Dream House, Says Guy Who Invented Case-Shiller

VangeIV says: "The US government was pushing home ownership and forcing banks to lend money to people who could not afford to own homes"...

Ahhh, so it seems...

From the Economist: How exactly did inequality fuel the crisis?

 
At 9/02/2010 12:57 PM, Blogger PeakTrader said...

Juandos, from your most recent article post:

"There was no government involvement required to precipitate the Dutch tulip-bulb frenzy of the 1620s, or the tech-stock boom of the 1990s. Ponzi schemes require no implied government guarantee.

Yet a lot of people seem to be seeking for a way to claim that government distortion of the real-estate market played a key role in this crisis, even though the evidence shows that what changed was not government, but financial markets."

 
At 9/02/2010 7:25 PM, Blogger VangelV said...

Anyway, sounds like a bunch of elitist talk: Americans consume and borrow too much, good renters make bad homeowners, it's sensible to wash-out everyone except the strongest households, turn a recession into a depression, etc.

There is nothing elitist about pointing out that people with no incomes and bad credit histories should not be allowed to buy $350K homes with no money down.

And I'm sure some want to continue blaming Bush, Wall Street, and corporate greed.

Bush is as bad as Obama was. Wall Street uses regulators to protect itself from competition and the Treasury from having to manage risks properly. I don't like government much and want to see the markets work properly. Let the big banks fail and get acquired by the banks that chose prudence over reckless behaviour. If people can't pay their mortgages take their homes and sell them to those who have the money to buy them. Stop rewarding bad behaviour and irresponsible actions and let money flow to those that deserve it most.

 
At 9/02/2010 7:43 PM, Blogger VangelV said...

Ahhh, so it seems...

From the Economist: How exactly did inequality fuel the crisis?


The commentary in the Economist is not very good. It ignores the fact that the securitization process was created to offload the risk of holding subprime mortgages onto others. Once that process was in place it opened up the game to unregulated lenders and got the GSEs to enter the game and make the bubble larger.

My preference is for commentary that predicted that a problem would happen and identified the causes long before the bubble burst.

http://www.city-journal.org/html/10_1_the_trillion_dollar.html

 
At 9/02/2010 8:10 PM, Blogger Ron H. said...

"Yet a lot of people seem to be seeking for a way to claim that government distortion of the real-estate market played a key role in this crisis, even though the evidence shows that what changed was not government, but financial markets."

Peak, if nothing else, perhaps you will agree that existing government distortions allowed financial market players to take actions they wouldn't have taken if all the risk had remained theirs, and that Fed action played a part through easy money policies.

What do you think would have happened with no CRA, no Fannie or Freddie, no FED, no home mortgage interest deduction, no special treatment of capital gains, etc.

Why does government have any interest in home ownership?

You previously asked why 70% home ownership wasn't possible, and the answer should be obvious. It's just not 'sustainable' without government interference in the market.

You also asked why 'we' are only building 300k houses/yr when 'we' have the capacity for 2 million. That answer should also be obvious. Everyone who can possibly buy a house has already done so. In fact, it appears that many people who CAN'T buy a house have done so. The market is completely saturated. There is now a massive inventory of unsold houses, and no one in their right mind would consider building more.

The good news, not often reported, is that those who patiently saved and waited to buy a house can now do so at bargain prices.

 
At 9/02/2010 8:14 PM, Blogger VangelV said...

The good news, not often reported, is that those who patiently saved and waited to buy a house can now do so at bargain prices.

Don't be so sure. There is always the nuclear option of devaluing the purchasing power of the dollar. Obama and Bernanke may yet sacrifice savers in one last attempt to bail out the reckless. Unless the savings is in the form of gold and silver out of the reach of the US government the risks for savers looking to buy homes are still very high.

 
At 9/03/2010 11:52 AM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 9/03/2010 12:08 PM, Blogger Ron H. said...

"Don't be so sure. There is always the nuclear option of devaluing the purchasing power of the dollar. Obama and Bernanke may yet sacrifice savers in one last attempt to bail out the reckless."

Well yes, there is that, and it may be coming in any case. But wouldn't that cause all commodity prices to rise as well as real estate? If that's the case, it seems even more important to buy now.

 
At 9/03/2010 12:20 PM, Blogger VangelV said...

Well yes, there is that, and it may be coming in any case. But wouldn't that cause all commodity prices to rise as well as real estate? If that's the case, it seems even more important to buy now.

The best time to have bought was when Greenspan made it clear that he would not allow liquidation in the post-IT bubble. Roger, Faber, and the analysts who understand the Austrian Schools were warning about a loss of purchasing power for the USD and that there would be a day of reckoning that would wind up destroying the country and the fiat paper issued by the Treasury.

For the record, hyperinflation is a terrible time to be a home owner.

 
At 9/03/2010 1:56 PM, Blogger Ron H. said...

"...Austrian Schools were warning about a loss of purchasing power for the USD and that there would be a day of reckoning that would wind up destroying the country and the fiat paper issued by the Treasury."

Hmmm...Maybe stocking up on ammunition would be a good course of action.

 
At 9/03/2010 2:26 PM, Blogger VangelV said...

Hmmm...Maybe stocking up on ammunition would be a good course of action.

I am not into the civilization will fall story. If you really were forced to live in a Hobbsean environment I doubt that a 'have ammo' strategy would work very well for very long. The most likely development would be one of spontaneous order, where people get together for economic and security purposes. In either case it really helps to have the one thing that people will always need, a medium of exchange that makes trade possible by reducing transaction costs.

This is where the anti-gold critics always fall short. They believe that gold has no real use because they ignore its monetary value as a medium of exchange.

 
At 9/03/2010 4:39 PM, Blogger Ron H. said...

"The most likely development would be one of spontaneous order, where people get together for economic and security purposes."

I agree. I see the ammo as being part of the security purpose you mention.


In either case it really helps to have the one thing that people will always need, a medium of exchange that makes trade possible by reducing transaction costs.

Agreed.

 

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