“Fragile” Housing Prices

December 30, 2009

by Scott Sambucci

1 comment

In October, our analysis of the then recent upward S&P/Case-Shiller HPI movements from June, July, and August showed that the rate of price increases would be unsustainable in the short and longer term. (See “Unsustainable” from October 28, 2009) David Streitfeld’s article yesterday on NYTimes.com – “New Slip in Housing Prices Undercuts Fragile Optimism” – further supports housing market trends that we’ve been watching over the last couple months in our active listings data.  From the article, discussing the flattening of the S&P/Case-Shiller HPI in October 2009:

But others said that the Case-Shiller index showed an increase only because each report is an average of the preceding three months, meaning the strong August market was still a component of the October report. Another factor supporting the index is the seasonal adjustments, which tend to hide any weakness in the cooler months as the pace of home-buying slows.

Examining the Altos Research 10-City Composite that leads the S&P/Case-Shiller Home Price Index, the 7-day weekly market price trends have been dropping off sharply since late October, with relatively muted effects on the 90-day rolling average so far.  As these 7-day observations begin to pile up, expect the 90-day average to maintain its steady decline for the next few months into 2010.

Altos Research 10-City Composite since 01/01/08
Altos Research 10-City Composite since 01/01/08

In early 2009, the 7-day values bounced off our there lows in early January with the 90-day averages catching up by March. The next 2-3 weeks will be pivotal for the entire 2010 Spring season.  But that’s not all…

As noted in this week’s look at 2009 year-end housing market trends, a troubling sign is the continued weekly declines in the Price of New Listings, one of our Seller Confidence Indicators. But here’s the spookiest part of our price trend analysis – the Price of New Listings and the Price of Listings Absorbed trends are now inverting.  This means that new sellers are listing their homes at price below those homes that are exiting each week – a clear sign that seller confidence is fading as we end 2009. Additionally, price levels of these sub-groups of active listings are also at levels well below the overall market median price  indicating that housing activity is regulated to lower price ranges. Worse of all, the gap between new & exiting listing activity compared to the overall market median ask price is widening.

90-Day Rolling Averages for Median Ask Price, Price of New Listings, and the Price of Listings Absorbed

90-Day Rolling Averages for Median Ask Price, Price of New Listings, and the Price of Listings Absorbed

As the calendar turns to 2010, we’ll be watching these Seller Confidence Indicators closely to see if indeed there’s a sign that housing prices might indeed drop off in 2010.  Also check out this week’s series – 2009 Year-End Housing Trends – which offers a region by region look at key metro areas across the country.

Here’s a link to Streitfeld’s complete article on NYTimes.com.

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