Case-Shiller Home Price Indices Decline to New Secular Bear Market Lows in January

| March 27, 2012

The Case-Shiller home price data for January were released today, showing another broad decline in the 10-city and 20-city composite indices to new lows for the secular downtrend from the bubble peak last decade.

Data through January 2012 … showed annual declines of 3.9% and 3.8% for the 10- and 20-City Composites, respectively. Both composites saw price declines of 0.8% in the month of January. Sixteen of 19 MSAs also saw home prices decrease over the month; only Miami, Phoenix and Washington DC home prices went up versus December 2011. “Despite some positive economic signs, home prices continued to drop. The 10- and 20- City Composites and eight cities – Atlanta, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa – made new lows,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “Detroit and Phoenix, two cities that have suffered massive price declines, plus Denver, saw increasing prices versus January 2011. The 10-City Composite was down 3.9% and the 20-City was down 3.8% compared to January 2011.

The following graph from Calculated Risk displays the long-term view of the 10-city and 20-city composite indices.

As expected, the current phase of the secular downtrend following the implosion of the most speculative bubble in residential real estate history continues to decline at a measured rate. In real terms, prices continue to trend lower as shown on the following graph of the inflation-adjusted versions of the CoreLogic HPI, the Case-Shiller 20-city composite and the Case-Shiller national index.

Overall, residential real estate values will remain under pressure as the massive oversupply introduced during the speculative frenzy of the bubble years continues to be slowly integrated into the market. Leading data in the housing market suggest that a cyclical bottom may develop this year, but a strong rebound in prices is highly unlikely. Once a sustainable long-term bottom is formed, home values will likely consolidate for many years before the next structural advance develops.

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