S&P/Case-Shiller Indexes Continue To Slide

January 29, 2008

Home price indexes reach new record lows.

For those watching the Standard & Poor's/Case-Shiller Home Price Indexes these past couple of years, it's been a bit like watching progressive freeze frames of a car accident. The indexes measure the changes in the prices of existing single-family homes, which have not been doing well at all. With every monthly announcement, the disaster becomes more gruesome, and the November reading—released today—is no exception.

The October results, released shortly after Christmas, saw the 10-City Composite achieve an annual decline of 6.7%, beating a 16-year-old record, and the record-breaking continued in November, with that decline increasing to 8.4%. Meanwhile, the newer 20-City Composite, which only has data going back to 2000, was down 7.7%. October 2007 is the 11th month of negative annual returns and the second full year of decelerating returns, meaning the growth of housing prices essentially ground to a halt two years ago and has been in the equivalent of a slow-motion free fall for almost a year.

"We reached another grim milestone in the housing market in November. Not only did the 10-City Composite post another record low in its annual growth rate, but 13 of the 20 metro areas, each with data back to 1991, did the same," says Robert J. Shiller, chief economist at MacroMarkets LLC and one of the creators of the S&P/Case-Shiller Home Price Indexes.

Shiller pointed out that every metropolitan statistical area covered by the indexes has now posted three consecutive monthly declines and that the two composite indexes and eight of the 20 MSAs have seen falling prices for 12 consecutive months. He added that 14 of the 20 MSAs and the two composites, recorded their single largest monthly decline on record in November. The 10-City Composite saw a decline of 2.2% from October, and the 20-City composite was down 2.1%.

Seven of the MSAs recorded double-digit annual declines in November: Miami led the way down with a 15.1% decline, followed by San Diego (down 13.4%), Las Vegas (down 13.2%), Detroit (down 13.0%) and Phoenix (down 12.9%). Los Angeles showed the largest one-month decline, down 3.6%, while San Diego was down 3.4%. San Francisco and Las Vegas were both down 3.2% for the month, and Phoenix fell 3.1%. None of the MSAs had positive monthly returns in November, and only three had positive annual returns—Charlotte was up 2.9%, Seattle was up 1.8% and Portland was up 1.3%.

Things don't look like they're going to pick up any time soon for real estate. Just yesterday the U.S. Department of Commerce reported that new home sales fell a record 26.4% in 2007. Meanwhile, December sales fell a rather steep 4.7%, and the median home price was down 10.4% from the previous year—that's the largest 12-month decline in 37 years, according to an article from the Associated Press.

Existing home sales aren't quite the same thing as new home sales, but December could easily be just as grim as November was for the S&P/Case-Shiller Home Price Indexes.

Source: Standard & Poor's

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