Statistical Indicators

Case Shiller Numbers August 2010 (for June 2010)

Posted on Tuesday, August 31, 2010

The latest numbers released at 9 AM EST today for June 2010 reflect home sales values;

Up 1.0% MOM (from June 2010) (pretty much flat line) (Miami up 1.1%)

20 city up 4.2 % YOY (from June 2009). 10 City up 5% (but last year was horrible)

17 of 20 cities in composite up in June.

But level of increase seems to be slowing.

Quarter: Up 4.4% Q2 2010 over Q1 2010 (had fallen 2.8% in Q1 2010 from Q4 2009)

Up 3.6% Q2 2010 YOY (from Q2 2009).

It's interesting prices are up in most areas including Miami, which beat the national average. More common has been numbers still depressed in those harder hit areas.

Most agree though that overall prices are not rising as much as before. I would have expected a bigger increase still since the tax credit closings have until September to close. Remember, Case Shiller reflects the price of homes that sold a few months back and are closed during the reporting period (in this case June). Not seeing those in the results now indicates that we may be done with whatever benefit the tax credits may have provided. In other words, we should not expect to see many homes closing from tax credit incentives before that credit expired between now and the deadline by which they must close in September.

Last week we saw both new and existing sales down (alot), inventory up to 12.5 months, plus that 7 million shadow inventory which we can expect to sell at 27% udner market. All this translates to to prices which we can expect to go down further when the case shiller numbers come out again next month.

And that of course translates to personal net worth for the owners of the 112 million units in America, many of whom will no doubt decide to walk away and all of whom will need years to recover this lost home equity and personal wealth/net worth. And when folks feel poor they don't spend in the broader economy.

On the other hand, the glass is half full! We're several years into this now. Unless someone screws it up, we're probably past the worst of it even if we are still playing hot potato with the debt (on so many levels) no one wants to be resopnsible to repay. Sure home values will probably drop a ilttle further. But they did that in the early 90s and we survived. It is time, however, to put all of this into a more nromal framework. Diong so means looking forward, not back. Getting ourselves out of the bubble - oh I cant believe we lost it all (when we never really had it) mindset.

Specifically, the indicator we use compare where we are today with where we were at an equally messed up time in space. For example, this months case shiller numbers look at sales prices today compared to last month (a comparison date whihc was also wacky). Or compared to the same time last year (another uncertain time). Or quarter to quarter. As such they require drilling down to really understand what they tell us. For example, we might compare todays sales values to the values in, say, the fall of 2009. And without knowing that we saw a big price drop in the fall of 2009, todays numbers might look great. Such is the nature of indicators, which is fine. They are what they are and they service a purpose. But it's time to also focus a bit more at bigger picture – not MOM or YOY numbers, but where we all stand in a larger, 30,000 foot in the air historical context of real estate prices. For example, a more realistical baseline might be to look at the last time prices where somewhat mornal in a historical conext. Like, say, before the bubble. In 2003. It may comfort you to know that prices today are about where they were at in the Fall of 2003. Or maybe we want to look at how much we should expect home home prices to increase based on how much they increased over a period of time, like say forever - before the bubble. Ding so we'd realize prices increased about 1% annually until the 1990s and about 4% after that. I have no doubt that once we get through all that excess inventory and foreclosures prices will stabalize and be back in line with those annual appreciation values, once again providing increases in personal wealth and net worth that homeowners can bank on.

For now the focus needs to be getting the inventory and 14% of homes that are in default or foreclosure through the system and absorbed, giving folks incentives to stay put if they can and not walk away, and employment.

Real estate today is not longer about location, location, location. Its about jobs, jobs, jobs.

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