THE HOUSING DOUBLE DIP ARRIVES RIGHT ON SCHEDULE
As expected in our housing outlook earlier this year the housing market has succumbed to the lack of real demand, supply pressures and negative seasonal trends in Q4. The latest Case Shiller data confirms that the housing double dip is upon us. The question now is how severe will the second leg down be and will it meaningfully impact the economy? I’ll be updating my housing outlook the first weeks of 2011. This morning’s Case Shiller report is attached (via S&P):
“Data through October 2010, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show a deceleration in the annual growth rates in 18 of the 20 MSAs and the 10- and 20-City Composites in October compared to what was reported for September 2010. The 10-City Composite was up only 0.2% and the 20-City Composite fell 0.8% from their levels in October 2009. Home prices decreased in all 20 MSAs and both Composites in October from their September levels. In October, only the 10-City Composite and four MSAs – Los Angeles, San Diego, San Francisco and Washington DC – showed year-over-year gains. While the composite housing prices are still above their spring 2009 lows, six markets – Atlanta, Charlotte, Miami, Portland (OR), Seattle and Tampa – hit their lowest levels since home prices started to fall in 2006 and 2007, meaning that average home prices in those markets have fallen beyond the recent lows seen in most other markets in the spring of 2009.”
The chart above depicts the annual returns of the 10-City and the 20-City Composite Home Price Indices. In October 2010, the 10-City and 20-City Composites recorded annual returns of +0.2% and -0.8%, respectively. October was the fifth consecutive month where the annual growth rates moderated from their prior month’s pace, confirming a clear deceleration in home price returns. The 10-City Composite posted a +0.2% annual growth rate in October, versus the +5.4% reported five months prior in May, and the 20-City Composite has now reentered negative territory, down 0.8% in October versus its +4.6% May print.
“The double-dip is almost here, as six cities set new lows for the period since the 2006 peaks. There is no good news in October’s report. Home prices across the country continue to fall.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The trends we have seen over the past few months have not changed. The tax incentives are over and the national economy remained lackluster in October, the month covered by these data. Existing homes sales and housing starts have been reported for both October and November, and neither is giving any sense of optimism. On a year-over-year basis, sales are down more than 25% and the months’ supply of unsold homes is about 50% above where it was during the same months of last year. Housing starts are still hovering near 30-year lows. While delinquency rates might have seen some recent improvement, it is only on a relative basis. They are still well above their historic averages, in both the prime and sub-prime markets.
“Looking at the monthly statistics, all 20 MSAs and both Composites were down in October over September. While not always consecutive months, twelve of the MSAs and both composites have posted at least six months of decline since the beginning of 2010. In addition 15 MSAs and both composites have posted three consecutive months of decline with October’s report; a further sign that the few months of positive print earlier this spring were only a temporary boost. The seasonally adjusted data tell largely the same story.”
Source: S&P
Agreed 1,000%. However, this has to be the most priced in expectation I can think of, to be honest.
Only a complete fool would think real estate is coming back in any big way for the next 10 years.
one more comment/prediction for ya, we will see 40 and 50 year mortgages pushed soon, by none other than Fannie and Freddie. Prop up prices and stir demand.
Watch it happen buddy.
This must be why homebuilders and the XHB are across the board breaking out. Probably going to be one of the better performing groups in 11. Can’t imagine what would happen if, like every other area of the economy, the bull housing argument wins out…
Sorry, my sarcasm detector must be defective-
Exactly!!!! Watch something happen to the other side, i.e., if something bullish happens for housing, holy crap.
I work for a small correspondence lender and our business is down more than 50% for the last 6 weeks. Looking back I am not surprise that we have had a great rally. Many people who refi-ed in the last 6 to 8 months have enjoyed some of the lowest rates available. I would surmised that these savings from the refis have made their way into the economy through higher spending. Now that rates have risen to level last seen in mid May, the refi spigot have been tightened quite a bit. Also there are pushes out there to get people to buy homes before rates goes even higher. That may serve as additional spending crimp on the retail sector while possible increasing the home builders equity attractiveness.
prescient,
i don’t see 40-50 year mortgages happening. psychologically, that would be assuming debt for a LONGER period of time when to me, the psychology currently operating is trying to reduce debt, not assume a greater or longer period of indebtedness.
doesn’t matter what type of debt is being pushed, 40 year mortgages or car loans. it won’t go if the consumer continues to try to deleverage. He/she has to feel confident about what’s happnin’ in the financial world before he/she is willing to assume a long term commitment. my sense is, consumer still feels VERY shaky. After all, no one in the banking industry has ended up in jail yet, as compared to the 1800 that did when S and L collapsed in the 80′s..
just my opinion………..
Not too long ago 7 year car loans were unheard of.
I’d say it depends on whether the consumer is deleveraging voluntarily or involuntarily (as if it’s uniform, but we’ll ignore that for now). If voluntarily, I agree 40 year loans won’t sell much. But if involuntarily, Americans will clamor for what they once had and can now have once again. Welcome to Japan and the 99 year home loan.
While I think that some Americans have “gotten the message”, I still believe there are plenty who will get up to their eyeballs in debt to have the latest and greatest whatever, if offered the choice. Much like govt accommodation, I don’t believe this process will cease from within. The American consumer is not going to give up without a fight.
ps, of course, there IS the xmas retail data that says some consumers DON’T feel shaky………. i’m betting they will in a couple more months….