U.S. home prices fell in October for the 10th consecutive month
On Wednesday December 26th, 2007 we saw the release of the Standard & Poor’s/Case-Shiller home price index report.
It was followed by the headline in the “Arizona Daily Star“ with
Home prices’ new decline is most since ‘91
The Case/Shiller index.
“Home prices could fall another 10 percent over the next 12 to 18 months before bottoming out, said Patrick Newport, an economist with financial consultancy Global Insight.
Newport said four of the largest groups currently trying to sell homes — banks holding foreclosed properties, home builders, speculators and unemployed consumers — are typically flexible about lowering house prices because they need to get rid of the property.”
Based on the post from yesterday and the report on the data structures for the Case-Shiller Home price index does anyone see an issue of siting the case shiller as evidence for this report?
Here is a hint. Look at the four groups selling properties now and think about what is and is NOT included in the Case-Shiller Home Price Index data.
- foreclosed properties (included)
- home builders (not included)
- speculators (if sold in 6 mo. or was New Construction) or Second Sale of property (not included)
- unemployed consumers (included)
Nice to see that reporters and those quoted for articles don’t let the facts get in the way of what they are writing.
I’ll do a little analysis here. We learned yesterday that homes with a significant increase in value over a long period of time are weighted down.
If a speculator bought a home and started to do repairs and didn’t finish and just put the house on the market torn up, it will not be weighted for the down side of the next sale price.
If the house is owned by someone unemployed there is a good chance there is deferred maintenance on the home. Meaning a lower purchase price.
The same holds true for foreclosed properties. It is very unusual to find a foreclosed property clean and well maintained especially if they were a rental property.
Doesn’t it seem likely given the categories listed in the article that all of this would be a negative influence on the Home Price Index?
These are not the only properties being sold, especially here in Tucson. We don’t have the final numbers for the year yet but as of November we were still showing just over a 1% gain in prices over last year. Considering the amount of gain posted over the past 3 years, it is amazing to be there is any gain at all.
Finally, I promise this is my last post on the S&P Case-Shiller Home Price Index this year. But I might refer back to it when the media once again makes reference to it as evidence of how terrible the US Housing Market is doing in 2008.
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Dave Smith | Tucson Real Estate News
