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Housing Prices Plummet, Consumer Confidence at All-Time Lows

Posted by Larry Doyle on March 31, 2009 11:42 AM |

While recent housing data has shown a pickup in home sales and housing starts, albeit from very low levels, data released this morning showed no stability in home prices.  The WSJ reports:

Most of the nation appears to remain on a downward path, with all of the 20 metro areas reporting annual declines, and nine… falling more than 20% in the last year,” said David M. Blitzer, chairman of S&P’s index committee. Both composite indexes and 13 of the 20 metropolitan areas reported record year-over-year declines.

As of January, the 10-city index is down 30% from its mid-2006 peak and the 20-city is down 29%. The two indexes have fallen every month since August 2006, 30 straight.

The indexes showed prices in 10 major metropolitan areas fell 19.4% in January from a year earlier and 2.5% from December. The drop marks the 10-city index’s 16th-straight monthly report of a record decline.

In 20 major metropolitan areas, home prices dropped 19% from the prior year, also a record, and 2.8% from December.

Again, none of the regions could stave off a decline from December to January. Month-to-month decliners were again led by Phoenix, which posted a drop of 5.5%. Las Vegas, which has been a close second behind Phoenix for months, showed a “marginal improvement” in monthly returns, although its results were still negative.

For the 10th straight month, no region was able to avoid a year-over-year decline. Phoenix and Las Vegas were again the worst performers, with drops of 35% and 33%, respectively, from a year earlier. San Francisco again followed, with a decline of 32%. Phoenix is down 49% from its peak in June 2006. Dallas has been the least hurt, down 11% from its peak in June 2007.

Compared with a year earlier, Dallas and Denver again had the best relative performance, with annual declines of 4.9% and 5.1%, respectively.

The data come a week after a government report that sales of previously occupied homes jumped 5.1% in February, the most in five years, driven by foreclosure sales that are sending prices plunging. The median price was down 16% from a year earlier, the second-biggest drop ever.

Tight credit and a still-bleak economic outlook amid high numbers of job cuts have added more stress to U.S. households, meaning the glut of housing remains.

Additionally, a consumer confidence survey released by the University of Michigan remained unchanged from the all-time low level reported in February.  The WSJ offers further color:

The Conference Board reported Tuesday that its March consumer confidence index remained relatively unchanged in March, at a reading of 26.0, after hitting an all-time low in February.

February’s reading was 25.3, which was revised up slightly from the originally reported 25.0.

Economists surveyed by Dow Jones Newswires had expected the March index would come in at 27.7.

The present situation index for March fell to 21.5 from February’s upwardly revised 22.3, while the expectations index increased to 28.9, from the prior month’s 27.3. It was originally reported at 27.5.

“The present situation index suggests that the overall state of the economy remains weak and that more job losses are on the horizon,” said Lynn Franco, who leads the private research group’s Consumer Research Center.

Apprehension about the outlook for the economy, the labor market and earnings “continues to weigh heavily on consumers’ attitudes,” Franco said.

Looking ahead, consumers remain “extremely pessimistic” about the short-term future and do not forsee a turnaround in economic conditions over the coming six months, she said.

In the report, consumers calling business conditions “bad” rose to 51.1% of the survey from 50.5% in February, while those calling conditions “good” edged down to 6.8%, from 7% the month before.

The Conference Board also found concerns about hiring have increased, with those calling jobs “hard to get” moving up to 48.7% of respondents, from 46.9% in February. Those who deemed jobs as “plentiful” was unchanged at 4.6%.

The Conference Board’s findings are based on a representative sample of 5,000 households. The cut off for responses was March 24. 

The question we are trying to answer is whether the economy is turning and will the markets subsequently improve. Are we in a bottoming phase in which the economy turns up? Are we in a holding phase in which we muddle along? Are we in the eye of the storm in which we batten down the hatches prior to another move lower?

Robert Shiller, professor of Economics at Yale and a designer of the S&P/Case-Shiller Housing Index assessed the economy as deteriorating at too rapid a rate of decline. (Home-price index data from the 20 metro areas Case-Shiller tracks is included at the end of this post).

In all, these reports do not provide a clear cut view, so prudence and discipline dictate we remain cautious about commiting capital to the market and continue to work at keeping expenses down.

And now the Case-Shiller chart . . .

case-shiller-home-index

Wall Street Journal, No Relief From Home-Price Drops; March 31, 2009
Wall Street Journal, A Look at Case-Shiller Numbers, by Metro Area; March 31, 2009

  • bonddadddy

    oh larry ……. don’t be such a partypooper . Meredith Whitney is rumored to be out telling her clients to cover all their bank shorts today because the Feds are about to relax ‘mark to market’ rules as well as allow retroactive application to Q1 2009 earnings which might allow them to post blow away earnings surrprises to upside ( better re-entry into bank shorts then says Whitney ) .

    Party favors for all . Wave the magic wand and all those souring assets are solid PAR bonds/loans again …..

    ….until they stop performing of course but thats a problem for the future .

  • Larry Doyle

    Daddy…you know jsut as well as I that relaxing the MTM and reclassifying earnings is nothing more than smoke and mirrors to jump the market. You are right, if the mkt jumps on that, reset the shorts…

  • bonddadddy

    well , its got the bank shorts in full retreat today ….. and add in the fact there are no US Treasury auctions this week but uncle ben is in buying all week so they can goose T-bonds higher along with the S&P with no fears !

    who knew we can have stocks and bonds soar together when you vote in such perfectly brilliant folks into Wash DC !

  • Larry Doyle

    I got it…although I have a hard time getting excited about banks when Turbo-Tim indicates that certain banks will need LOTS of capital.

    I think we are in a trading range much like we were between October -Jan when 8700 was the middle of the range.

  • lizzy

    LD,
    Do you know how they assign the market values for the prices of houses. The only thing I’Ve heard of in the New York market was a Chelsea garage spot for $195,000. There really is such wide variation in prices that I am curious how they can set the values.

  • Larry Doyle

    Lizzy,

    One thing you can count on is that I will not make things up that I am do not know. I am assuming that the index receives real time market data of real estate transactions. How do they weed out high end sales vs low end to determine the average? Good question.

    I do know that there is a wide disparity between asking prices and prices at which homes/apts actually sell. The asking price is almost meaningless in many cases.

  • lizzy

    I didn’t mean to imply that the values were wrong. We have been out looking around a bit and the prices flucuate wildly so I was curious if you were familiar with their process.

  • Larry Doyle

    Unfortunately not…






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