Case-Shiller Home Price Index Continues Downward

The S&P Case-Shiller Home Price Index for July came out today. Here were the two headlines from the mainstream media:

Case Shiller Home Prices Fell 4.1% in Year Ended July (Bloomberg)

U.S. Home Prices Post Seasonal Rise (WSJ)

So which was it? Did home prices rise or fall? Technically they are both correct, but each one slanted the information in the way they wanted the story to read. Glass half-full or half-empty?

The truth is more in line with what Bloomberg said and that is that home prices are still falling, the current gains are technical results from the foreclosure problems that lenders have, and that foreclosures will resume and increase shortly and the market will continue to be depressed.

“The enormous supply overhang of existing homes, particularly factoring in all those in foreclosure or soon to be, promises to keep pressure on prices for some time,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said in a note to clients. “We look for further declines to be registered in the quarters ahead, although in all likelihood the rate of deterioration will be nowhere near as steep as that recorded earlier.” [Bloomberg]

Here is what it looks like:

The ten-city index is identical. There are seasonal factors at play here as well (summer having higher sales).

According to the Report:

U.S. home prices, showed a fourth consecutive month of increases for the 10- and 20-City Composites, with both up 0.9% in July over June. Seventeen of the 20 MSAs and both Composites posted positive monthly increases; Las Vegas and Phoenix were down over the month and Denver was unchanged. On an annual basis, Detroit and Washington DC were the two MSA that posted positive rates of change, up 1.2% and 0.3%, respectively. The remaining 18 MSAs and the 10- and 20- City Composites were down in July 2011 versus the same month last year. After three consecutive double-digit annual declines, Minneapolis improved marginally to a decline of 9.1%, which is still the worst of the 20 cities. …

[T]he 10-City and the 20-City Composite Home Price Indices. In July 2011, the 10- and 20-City Composites recorded annual returns of -3.7% and -4.1%, respectively. …

The S&P/Experian Consumer Credit Default indices showed a continuing decline in mortgage default rates, a two-year trend. However, if you look at the state of the overall economy and, in particular, the recent large decline in consumer confidence, these combined statistics continue to indicate that the housing market is still bottoming and has not turned around.