Data firm Radar Logic and consultant Capital Economics said Tuesday that they expect home prices to decline further this year.
Their analysis comes in the wake of Tuesday’s The S&P/Case-Shiller composite home price index, which fell 1.6% from a year ago and 1% month-over-month. Prices on homes with mortgages backed by the federal government were unchanged during the same time period, according to the Federal Housing Finance Administration.
“Notwithstanding the deceleration in the rate of home prices, we believe that home prices will continue to weaken on a month-over-month basis until spring, and a year-over-year basis through the end of 2011,” the Radar Logic said.
Radar Logic made a similar assessment when it released its RPX composite price index last week, which showed a 0.3% increase in home prices from October to November.
Research firm Capital Economics also forecasts a price drop. The firm predicts a 5% drop by the end of 2011.
“That will send more homeowners into negative equity and constrain consumption growth,” Capital Economics said.
From the Christian Science Monitor:
It’s important to recognize that as we continue to move away from the government’s tax sham, the home sales and price movement fueled by that epic monstrosity are left further and further behind.
Yet, it will be some time before the effects are completely expunged from the CSI as its methodology uses a three month rolling average of the source data and further, as BostonBubble points out, since Congress moved to extend the closing deadline for the credit until September, the CSI data may not be free of the distortion until the February 2011 release!
In any event, you can see from the latest CSI data that the price trends are starting to slump and, as I recently pointed out, the more timely and less distorted Radar Logic RPX data is already capturing notable price weakness nationwide.
From the Daily Markets:
In November, home prices continued to slip, and the declines were very widespread. The Case-Schiller Composite 10 City index (C-10) fell 0.37% on a seasonally adjusted basis, and is down 0.43% from a year ago. The broader Composite 20 City index (which includes the cities in the C-10) fell by 0.54% on the month and is down 1.61% from a year ago.
This is the first time in this second leg down in housing prices that the year-over-year change has been negative for both composites. Of the 20 cities, only three — San Diego up 0.52%, Washington DC up 0.51% and Charlotte up 0.07% — posted gains on the month, while 16 saw prices fall. Las Vegas was unchanged on the month. Year over year, four metro areas saw gains and 16 suffered losses.
This is the fifth straight month-to-month decline in the composites. It thus looks like a new downtrend in housing prices is under way.
Eight cities posted new post peak lows. From the April 2006 peak of the housing market, the C-10 is down 30.99% while the C-20 is off by 30.91%.
The Case-Schiller data is the gold standard for housing price information but it comes with a very significant lag. This is November data we are talking about, after all, and it is actually a three-month moving average, so it still includes data from September and October. Existing home sales have been weak relatively weak in recent months (see “Existing Home Sales Rise”). While the inventory to sales ratio is down from the June peak of 12.5 months, it is still elevated at 8.1 months.
The second leg in the housing price downturn is not over. Housing prices are going to fall again in coming months.