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S&P Case-Shiller Index Points to Double-Dip in Home Prices

Posted By Carrie Bay On January 25, 2011 @ 8:06 am In Market Studies | No Comments

The latest ""Case-Shiller figures"":http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us released by ""Standard & Poor's"":http://www.standardandpoors.com (S&P) Tuesday signal home prices across the United States continue to weaken.

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Based on data through November 2010, the 10-city composite of the closely watched gauge was down 0.4 percent and the 20-city composite fell 1.6 percent from their November 2009 levels.

November was the sixth consecutive month where the annual growth rates moderated from their prior month’s pace, S&P noted. Only four of the 20 metropolitan areas included in the study â€" Los Angeles, San Diego, San Francisco, and Washington D.C. â€" showed year-over-year gains in November.

Home prices fell in 19 of 20 major metros on a month-to-month basis. The only city with a gain in November was San Diego, up a scant 0.1 percent. Thirteen of the metropolitan statistical areas saw average home prices drop by 1.0 percent or more.

S&P’s analysts say a double-dip in home prices could hit the market by spring.

The two composite readings remain above their spring 2009 lows. However, eight markets â€" Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Miami, Portland, Seattle, and

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Tampa â€" hit their lowest marks since home prices peaked in 2006 and 2007, meaning that average home prices in those markets have already fallen below their current cycle troughs.

Since May 2010, the housing market has experienced what S&P describes as an “unambiguous deceleration” in home price returns.

“With these numbers more analysts will be calling for a double-dip in home prices,” said David M. Blitzer, chairman of the index committee at Standard & Poor's.

Blitzer explained that a double-dip should be defined as seeing the 10- and 20-city composites set new post-peak lows.

“The series are now only 4.8 percent and 3.3 percent above their April 2009 lows, suggesting that a double-dip could be confirmed before spring,” Blitzer said. “Certainly eight cities setting new lows, and with the only positive news concentrated in southern California and Washington D.C., the data point to weakness in home prices.”

With an annual growth rate of +3.5 percent in November, Washington D.C. was the strongest market, but still well below the +7.7 percent annual rate of growth seen in May 2010. While San Diego, Los Angeles, and San Francisco are still above their November 2009 price readings, Blitzer says their annual growth rates have been shrinking in recent months.

A separate ""report released Tuesday"":http://www.fhfa.gov/webfiles/19648/MonthlyHPINov12511.pdf by the ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA) showed that U.S. home prices were unchanged from October to November but have fallen even farther on an annual basis.

FHFA’s index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the 12 months ending in November, the agency says prices fell 4.3 percent.

FHFA’s gauge is 14.9 percent below its April 2007 peak and roughly the same as the August 2004 index level.


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