How to Interpret Today’s S&P Case Shiller Home Price Report

May 31, 2011

by Mike Simonsen

7 comments

Objects in mirror are closer than they appear.

[update June 28, 2011: The April S&P Case Shiller released today finally shows the inflection. More details in this post about the real time real estate trends.]

The headlines are roaring today. Double Dip! Foreclosures! Worse than expected! The S&P Case Shiller Index came in lower than the bottom of 2009. Here’s the thing,  home price trends are only worse than expected if your expectations are uninformed.

Today’s Case Shiller headline was visible in November.

Altos Research and Case Shiller June 2011

Altos Research single family homes asking prices lead the Case Shiller Index by 60 to 120 days. Click for full size image.

In November we did a tour of our Wall Street clients. Boy were we bearish. Asking prices were down hard after the tax credit ended in 2Q 2010. Newly listed properties ticked lower week after week. We told clients to expect cratering through the first quarter of 2011.  It was obvious we were heading lower than the worst of the bursting bubble in March of 2009. After November, we like to point out, the first inkling of home price trends for 2011 would be the second week of February.

Home prices bottomed in March 2011 before their spring bounce and are up 8% off the lows.

Sure enough, by mid-February, the weeklies started bouncing positive. Like the Case Shiller, we use a 90-day rolling average to smooth out the noise, so the headline numbers transition more slowly.  Unlike the Case Shiller, our data comes out immediately. In March the rate of decline slowed, by April of this year we were showing flat monthly, last month our May data ticked up.

Here’s what we’re saying about the housing market right now

We now have June and it’s up again. Our June 2011 Real-time Real Estate Market Report will be out in a few days with details. Look for the July or August 2011 release of the S&P Case Shiller index to report it’s first month over month increase in a year. But by then, we’ll probably be back in seasonal home price decline. Register to get the report each month and stay ahead of the headlines.

Long short-term and Short long-term

It’s nice to be able to be contrarian AND bullish for once. The real-time data is up. Demand is responding to the low interest rates and years of falling prices. There are deals to be had. And, ironically, despite all the shadow inventory that might come on the market, if you’re buying a home right now, in most places you’ll notice that there aren’t all that many actually on the market for you to choose from! These are bullish, short-term factors for housing. They’re the reason home prices have rebounded since March.

Longer-term, though, the signals are weaker. The economy appears to be slowing again, the cheap-money lifejacket appears to be reaching saturation. The conventional wisdom that home-ownership-is-necessary-for-wealth is shifting. Meanwhile keep an eye on the real-time data and stay out of the rearview mirror.

 

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