Case-Shiller: Beware the Head Fake
There was some reason to take comfort about yesterday’s data from the Case-Shiller Index—the rate of price declines slowed for the third straight month nationally. But before you break out the champagne and check books, get a dose of what the Wall Street Journal had to say yesterday: The bloodletting may not be over. Here’s…
There was some reason to take comfort about yesterday’s data from the Case-Shiller Index—the rate of price declines slowed for the third straight month nationally. But before you break out the champagne and check books, get a dose of what the Wall Street Journal had to say yesterday:
The bloodletting may not be over. Here’s why: If price declines accelerate for the mid-to-upper end of the housing market, then that could generate enough large declines in values—even among a small segment of the overall housing market—to push the index lower still.
Meanwhile, here in New York (where there’s plenty of “mid-to-upper” properties) housing prices ticked down another 1.6 percent in April for a total of 21 percent off the June 2008 high, as the chart above shows.
joe…the interest rate thing is pretty complicated right now but there are two issues:
First, although rates at the very short end will remain low (the fed can keep them there) the rates at 5-30 years are more “market driven” and have been rising. That’s where mortgage rates are priced.
Additionally, those 5-30 year rates are what are most indicative of inflation expectations, and inflation expectations ultimately, over the longer term, drive the price of assets including real estate.
I’ll stand up to those credentials anyday…Northwestern University JL Kellogg Scool Finance Degree, CFA holder since 1983. Managed various International Mutual Funds since 1989 including a few teams of analysts. Guest on CNBC and Bloomberg TV from 1998 – 2007. Retired in 2007, now back in hedge fund business running international exposure.
bridges, good point
dibs, 9:40: “Nowhere did I say that NYC property was headed back up in the short term. If you don’t understand…I suggest you do some reading”
dibs, 9:59: “It’s an indication that the housing numbers are starting to turn and will be bottoming soon…if the whole process may take them 3-6 months then they better get off their ass and start looking”
oh wait, I get it now. you’re advising me to hurry up and buy a place in stockton?
Dave, you can’t just throw out econo-babble in the hopes of confusing people enough so that they throw in the towel and agree with you. So what’s this about Yellen then, are you saying long term rates will rise? I agree. Educate us, dave. what does that do to housing prices?
While the stock market is a leading indicator, it is not “the best” leading indicator — it is one among many, and economists debate how reliable it is. DIBS I think you are endowing it with too much predictive power. It is true that this recession must eventually come to an end, and that house prices will eventually stop falling. It is also true that households have taken a huge hit and will not do much to contribute to a rebound in spending.
Hi dibs. Stating that Winkler’s a reporter is not the same as disputing what he’s written, is it?
But, to go to your point, his is what he says about himself:
“Basic background info….former Internet and Media Analyst at hedge fund Matador Capital Management in St. Petersburg, Florida (long/short U.S. equity); University of Chicago Economics; CFA charterholder. I’ve contributed articles/op-eds/quotes to the NY Daily News, Baltimore Sun, Chicago Sun-Times, FT’s Alphaville, Housing Wire Magazine, NPR’s Planet Money, the Christian Science Monitor, and others.”
The stock market is actually back to 1996 levels if you look at the chart.
Rolfe Winkler and Chris Swan are reporters. Christ. At least quote some economist or strategist.
From Rolfe Winkler at Reuters:
My colleague Chris Swann says to beware of housing false dawns. I couldn’t agree more. While the pace of decline in house prices moderated in April, one has to consider the stupendous monetary stimulus that helped drive that improvement. With rates about as low as they can go, the only way to drive a sustainable increase in prices is to increase buyers’ income. With the employment picture continuing to deteriorate, don’t look for rising incomes any time soon.
http://blogs.reuters.com/rolfe-winkler/
joe…you’re not getting the “leading indicator” part and the fact that Case Schiller data is backward looking. The market doesn’t care about the housing numbers anymore, an probably not the employment numbers either because it sees beyond them.
It’s an indication that the housing numbers are starting to turn and will be bottoming soon. If someone’s in the market for a place and the whole process may take them 3-6 months then they better get off their ass and start looking.
As much as Janet yellen will keep the Fed Funds rate low, the market will move the price of Treasuries in the 5-30 year range down and rates will rise, another reason to be wary. A 30 year mortgage at these historically low rates is going to be worth a lot in the coming years.