S&P/Case-Shiller Home Price Index Down Sharply
The S&P/Case-Shiller home price index showed an accelerating rate of decline in June, which dragged prices down in Q2 by a substantial amount. The composite 20 city index, which only has a history dating back to 2001, fell by a record 3.50% in June measured on a 3-month annualized basis and by 3.49% measured on a y/y basis. The composite 10-city index, which has a longer history, fell by a y/y 4.1% in June and by a 3-month annualized 4.63%.
This index tracks individual properties, and therefore is not affected by a changing mix of housing. While not a perfect measure of home prices, it (and the OFHEO index which is similarly constructed) are the best indicators currently available.
As the chart at the bottom of this note illustrates, we are fast approaching the rate of price decline seen at the end of the 1990-91 recession, and the odds strongly favor blowing past this mark in coming months. With supply overhang growing and mortgage financing tougher to obtain, home prices are going to soften considerably further in the quarters ahead.
With that said, there is still a considerable dichotomy between geographical markets, as illustrated by the city detail in the table below. The weakest markets saw m/m declines of over 1% in June, while stronger markets were still posting increases of roughly 1%. Given conditions relating to mortgage financing, and the number of unsold homes that is piling up, areas posting price increases are likely to dwindle in the months ahead and weaker markets are going to erode further.