Home Price Declines Accelerate
The Case-Shiller Index Quarter 4, 2007 numbers are out, and still in free fall waiting for the chute to open. The acceleration of home price declines has been increasing. These two charts illustrate the long and short term of it.
The first graph shows the Case-Shiller Index from 1997 through the end of 2007. The most vertical portion is from 2002 through most of 2005. This is the national composite, and some areas have shown more sedate trends. However, in general things are not looking really good in any area of the country as far as home prices in all ranges. Some news about the luxury home market has been better.
To get a feel for the short term trend, the second graph depicts mid-2005 through the end of 2007. The peak is in mid-2006. The acceleration in the declines is evident. The OFHEO (Office of Federal Housing Enterprise Oversight) graph is less depressing. Generally, the OFHEO Index shows a better picture than Case-Shiller due to differing methodology.
Looking for some hope from Dr. Robert Shiller, one of the CS Index developers, isn't very helpful right now. In a Barron's video interview, he says he doesn't know when home prices will turn around.
Today a survey was published showing that only 20% of homeowners thought their home would go up in value over the next year. This level of pessimism is much greater than just a few months ago. This is one of many signs that lead one to believe that a bottom in the housing market is near. Once the economy begins to recover during Q4 2008 and into 2009 and we see some real wage growth, housing will come back with a vengeance.