Las Vegas Case Shiller Index Shows Smallest Decrease in 10 Months

August 26, 2008

Today’s Las Vegas Case Shiller index numbers show a drop of just 1.6%, a dramatic improvement over last month’s 2.9%, and the smallest decline since last summer.  The pace of price declines has trended slower since January, 2008, and this month’s numbers continue in the right direction.

The improvement is even more impressive given the conventional wisdom that foreclosures are still driving prices sharply lower.

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-Frothing Mark

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Positive Housing Study

August 5, 2008

This report ran yesterday in the Washington Post.

One of the most interesting parts of it is what it says about the widely-watched Case-Shiller index:

The Case-Shiller index weights transactions by value. For example, it gives eight times as much weight to the sale of an $800,000 home as it does to a $100,000 home, meaning it is particularly sensitive to what is happening with high-priced homes in the largest, most expensive markets.

I blame myself for not having realized it. It explains why my recent prediction that Las Vegas Case-Shiller numbers would stabilize in July was off. Las Vegas has hit, I believe, price stability on housing below $300k, but transactions on houses higher than that are having a destabilizing effect. In my opinion, there are very few houses worth more than $500k.


Home Prices Did Not Plunge 16% This Month

July 30, 2008

Case Shiller housing index numbers have been released for May 2008, and once again, the headlines tell a different story than the reality.  If you scanned a few of today’s articles you might not be blamed if you thought that home prices had plummeted 16% this past month.  The drop, of course, is versus 2007, not versus April 2008, and is old news at this point.  But some journalists, and more than a few bloggers still can’t resist casting out the old “Home Prices Plunge 16%” reader bait.

The actual Las Vegas numbers show a 2.9% decrease in average prices over the April 2008 numbers.  While the index has still not leveled off, the May numbers are a significant improvement over the drops in November ’07 through March ’08.

When looking at Case Shiller indices it’s important to remember two facts:

1.    A significant number of the home sales the index is currently measuring are foreclosures, which are skewing the indexes lower.  When these forced sales at abnormally low prices finally work themselves through the market we should expect to see the index start to rebound fairly quickly as more “normal” sales are reflected.

2.    The index lags the market very significantly.  The numbers Case Shiller calls “May ’08” are actually taken from a three month rolling average of sales for March, April, and May.  With market uncertainty at or near an all-time high, March may very well have been the real low.

-Frothing Mark


Futures Still Going Up. Chortle

June 30, 2008

Long-time readers (heh) will recall that Frothing Developer has put its money where its mouth is and bet big on Las Vegas in the housing futures market.

I’m pleased to report that the bid on November 2012 contracts has risen to 132 from the 130 where I was able to buy my last contracts and – get this- the ask is up to 155. Lord knows if anyone at this point is going to be dumb enough to sell contracts at these low prices. I’m going to keep buying them, though. You can follow the action at http://housingrdc.cme.com/


Case-Shiller Overstates Decline, Says Noted Bear

June 25, 2008

Amidst the usual journalistic hyperbole of “plunges” and “steep falls” in the SF Chronicle were some very interesting statemnents on the nature of the Case-Shiller index.

“Prices are dropping […],” said Patrick Newport, U.S. economist with Waltham, Mass., research firm Global Insight. That said, he and others believe the index may be overstating the extent to which average homes already have declined in value.

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Case-Shiller is a repeat sales index, meaning it tracks only the actual price gains or declines for homes that have traded hands at least twice. In the current market, the homes that have done so recently increasingly tend to be foreclosed properties, said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley.

It’s biasing the numbers in a way that makes it look a lot worse than it really is for the typical homeowner,” Rosen said. “I’m a bear, so I’d go with it if it were true.”


Case Shiller: The Tide Starts to Turn

June 24, 2008

The monthly Case Shiller numbers came out today, and from the shrill tone of the media’s reporting, you’d think the 4 Horsemen of the Apocalypse were riding again.

AP writes:

U.S. home prices tumbled in April at the fastest rate since a widely followed index was begun in 2000 with all 20 metropolitan areas surveyed posting annual declines for the first time

The problem with this analysis is that its based on year over year comparisons:

The Standard & Poor’s/Case-Shiller home price index of 20 cities fell by 15.3 percent in April versus a year ago, according to Tuesday’s report. Prices nationwide are at levels not seen since August 2004.

We already know that prices are down from April 2007. The only news worth looking at here is, how are prices trending now?

Case Shiller was down less, month over month, across the country, than any month since September 2007.

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Very similar data in Las Vegas:

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I’ve predicted that when next month’s numbers come out, we’ll be at 0% decrease, month over month, for Las Vegas. We shall see.


Breaking News: Great Case Shiller Numbers

June 24, 2008

Case Shiller came out for April this morning and as predicted, the numbers show Las Vegas recovery. There was month over month decline from March, but only 2%. That’s the smallest decline since last September, when inventory peaked. Look for Las Vegas price bottom to be confirmed in next month’s report, also as predicted here.

More analysis to come.