Paper Money - A US Real Estate Bubble Blog

S&P/Case-Shiller: October 2008

Posted: 30 Dec 2008 09:35 AM CST

Today's release of the S&P/Case-Shiller home price indices for October confirms a worsening of deterioration seen in the nation's housing markets with ALL of the 20 metro areas tracked reporting significant year-over-year declines and ALL metro areas showing large and even shocking declines from their respective peaks.

Further, there continues to be a notable re-acceleration of the price slide with the 10-city index dropping 2.08% and the 20-city index dropping 2.16% just since last month.

Also, it's important to keep in mind that today's release was compiled using settled home sales data from transactions that had gone under agreement in the August to October time-frame, many well in advance of the historic levels of financial collapse seen throughout the fall.

In all likelihood, we are now firmly sliding down an even more momentous slope of home price declines as the continued economic crisis and dramatically accelerating unemployment work to both crush consumer sentiment and force panicked mortgage lenders to continue to tighten their lending standards.

As the housing decline goes "Up-Prime" a larger and much more damaging population of homeowners will face historic levels of financial stress the outcome of which is, at the moment, very hard to calculate.

The 10-city composite index declined a record 19.06% as compared to October 2007 far surpassing the all prior year-over-year decline records firmly placing the current decline in uncharted territory in terms of relative intensity.

Topping the list of regional peak decliners were Phoenix at -40.56%, Las Vegas at -39.28%, Miami at -38.26%, San Diego at -36.44%, San Francisco at -36.15%, Los Angeles at -34.36%, Detroit at -32.23%, Tampa at -30.51%, Washington DC at -26.35%, Minneapolis at -20.69%, Chicago at -13.71% and Boston at -12.76%.

Additionally, both of the broad composite indices showed significant declines slumping -24.97% for the 10-city national index and 23.42% for the 20-city national index on a peak comparison basis.

To better visualize the results use the PaperEconomy S&P/Case-Shiller/Futures Charting Tool as well as the PaperEconomy Home Value Calculator and be sure to read the Tutorial in order to best understand how best to utilize the tool.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as compared to each metros respective price peak set between 2005 and 2007.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as on a year-over-year basis.

Additionally, in order to add some historical context to the perspective, I updated my "then and now" CSI charts that compare our current circumstances to the data seen during 90s housing decline.

To create the following annual charts I simply aligned the CSI data from the last month of positive year-over-year gains for both the current decline and the 90s housing bust and plotted the data with side-by-side columns (click for larger version).

What's most interesting about this particular comparison is that it highlights both how young the current housing decline is and clearly shows that the latest bust has surpassed the prior bust in terms of intensity.

Looking at the actual index values normalized and compared from the respective peaks, you can see that we are still likely less than half of the way through the portion of the decline in which will be seen fairly significant annual declines (click the following chart for larger version).

The "peak" chart compares the percentage change, comparing monthly CSI values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.

In this way, this chart captures ALL months of the downturn from the peak to trough to peak again.

As you can see the last downturn lasted 97 months (over 8 years) peak to peak including roughly 43 months of annual price declines during the heart of the downturn.

Notice that peak declines have been FAR more significant to date and, keeping in mind that our current run-up was many times more magnificent than the 80s-90s run-up, it is not inconceivable that current decline will run deeper and last longer.

Question of The Day - Is Paulson Delusional?

Posted: 30 Dec 2008 05:27 AM CST

As of mid-December Treasury Secretary Paulson was "…expecting no other major financial institution to fail…"

So, what about yesterday's GMAC rescue?

That was $6 billion of "fresh capital" direct from the Treasury Department.

Was Paulson delusional, just trying to manage PR or is a $6 billion rescue just small potatoes at this point?