Guess what? People don’t feel as good with their lot in life when the value of their house falls. What a concept. Professor Shiller wrote a position paper on the Wealth Effect which tied the power of consumer spending more closely to housing than stocks.
The Conference Board released their index and it has reached the level seen only during recessions. It is at its lowest level since 1973. Incidentally, I remember walking to school in 1973 (I wasn’t old enough to drive or shave) seeing long lines at the pump and the conventional wisdom said there was only 20 years remaining for oil.
The S&P/Case Shiller Index has only one market area showing positive price growth yoy (New Yorkers: remember that CSI excludes condos from it’s metro price calcs) – Charlotte, NC and the declines across their other 19 markets are growing and some are approaching 20%. My former firm Radar Logic will be releasing their monthly report next week and I expect it to say show something similar.
OFHEO, which is scrambling to remain relevant, has converted to monthly releases to compete with the CSI index. OFHEO shows prices for January were off 3% from a year earlier. OFHEO uses a similar methodology to CSI but only tracks conforming mortgages. The current threshold is $417,000, which severely underrepresents certain higher priced housing markets on the east and west coasts. I’ll have to look into how OFHEO is going to track housing stats after September 1 when the temporary conforming mortgage loan limits increases to a max of $729K. Also, it is important to only look at their purchase index since they, for some unexplainable reason, include refinance market value estimates in their data as well. We now know that appraised values during the housing boom were systemically inflated.
Of course this negative news is offset by the NAR press release (which is patently misleading) covering existing home sales:
One bright spot is that falling home prices may be beginning to spark buyers’ interest. The National Association of Realtors said earlier this week that sales of existing homes rose in February.