Statistical Indicators

Industry Insiders Weigh in on Case-Shiller Uptick

Posted on Monday, July 4, 2011

In what Standard & Poor’s analysts described as a “welcome shift from recent months,” the closely watched S&P/Case-Shiller index showed its strongest positive movement since June of last year with the release of Tuesday’s report.
The 20-city composite reading posted a 0.7 percent increase in April versus March. The 10-city composite was up 0.8 percent. (Both figures reflect non-seasonally adjusted measurements, which S&P says is the more reliable indicator when evaluating its index results given current market conditions.)
After steep declines from 2007 to 2009, home prices have been bouncing around the bottom for two years since and “the market still has the look of stuck in the doldrums,” Robert Shiller, chief economist for MarcoMarkets and namesake of the Case-Shiller index told Bloomberg Television.
But Shiller says he sees a “little bit of optimism” in the latest index results. He says the housing market is characterized by momentum and while further declines are likely in the cards, subsequent months’ data could present at least a short-range upward trend.
Commenting on the latest numbers, Rick Sharga, RealtyTrac SVP, said, “[Tuesday’s] Case-Shiller report is the first positive pricing news we’ve seen in quite some time, but not a signal that the housing market is on the road to recovery.”
Sharga says the small uptick in home prices recorded in April may have been due to seasonality, a slowing of distressed property sales because of ongoing paperwork issues, or even a change in the mix of the types of properties sold during the month.
“[I]ndications remain that while home prices may be beginning to stabilize, there’s still a good chance that we’ll see more price depreciation before we bottom out later this year,” Sharga said.
Paul Dales, U.S. economist for the research firm Capital Economics agrees with Sharga that prices have further to go before a floor is reached.
“With the foreclosure pipeline still full to bursting, we think that prices will fall by a further 3 percent over the remainder of this year,” Dales said.
He doesn’t foresee any true stabilization until sometime next year and no consistent gains until 2014.
But in terms of the more immediate fluctuations, Dales points out that the Case-Shiller index is a three month average, which means the market may have already turned up since the April timestamp, or at least, the downturn has eased.
As of April 2011, S&P says average home prices across the United States are back to the levels where they were in the summer of 2003. From the peak of June/July 2006, home prices are down 32 percent.
There are at least some buyers out there taking advantage of such affordability, as evidenced in the latest Case-Shiller numbers, according to Sue Woodard, president of content and publishing at Mortgage Success Source, which provides client acquisition and retention solutions to the mortgage lending industry.
“This report underscores that smart homebuyers are seeing the ‘perfect storm’ of opportunity and getting ahead of the curve,” Woodard said.
“There has not been a time in recent history where we’ve had such an amazing combination of affordable home prices, low home loan rates, and motivated sellers,” she added.
But Woodard cautions that this “perfect storm” isn’t expected to last. She says those on the fence about buying a home should make their move while this opportunity is still at hand.
Patrick Newport is U.S. economist for IHS Global Insight. He says going forward, the Case-Shiller indexes are likely to continue to post increases during the spring and summer homebuying season, and then turn down again come October.
Adding to home price pressures, he notes that according to the Mortgage Bankers Association, nearly 13 percent of all homeowners with mortgages are either behind on their payments or in foreclosure.
“We believe that weak demand and the weight of these mortgages-gone-bad will lead to distressed sales that will eventually drag the Case-Shiller composite indexes down at least another 5 percent” before turning around in 2012, Newport said.
By: Carrie Bay DS NEWS


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