By TheBigPicture | 25 September 2007
Case Shiller Housing Index July 2007
Click Here, or on the image, to see a larger, undistorted image.
Here's the excerpt that goes with it:
- "Data through July released today by Standard & Poor’s for its S&P/Case-Shiller® Home Price Indices, the leading measure of U.S. home prices, shows a continuation of negative annual returns in the 10-City Composite and the 20-City Composite, as well as 15 of the 20 metro area indices. Both composite indices have registered negative annual growth rates since the beginning of the year. In addition, both indices rate of decline has become larger in each of the seven months from January through July.
The chart above, depicting the annual returns of the 10-City Composite and the 20-City Composite, shows the 10-City Composite was down 4.5% versus July of 2006, while the 20-City Composite was down 3.9% over the same time period.
“The decline in home prices clearly continued into the summer months,” says Robert J. Shiller, Chief Economist at MacroMarkets LLC. “The year-over-year decline reported for the 10-City Composite is the lowest since July 1991. The lowest annual decline in this Index, which dates back to January 1987, was— 6.3%, which was reported in April 1991. The further deceleration in prices is still apparent across the majority of regions, with 16 of the 20 metro areas showing a drop in their annual growth rate from what was reported in June.”
- "Home prices in 20 U.S. metropolitan areas fell the most on record in July, indicating the threat to consumer spending was rising even before credit markets seized up in August, a private survey showed today.
Values dropped 3.9 percent in the 12 months through July, steeper than the 3.4 percent decrease in June, according to the S&P/Case-Shiller home-price index. The index declined in January for the first time since the group started the measure in 2001, and has receded every month since then.
Stricter lending standards and reduced demand are prolonging the housing slump, now entering its third year. Prices may continue to fall as homes stay on the market longer, economists said. Diminished housing wealth may spur households to pare spending, hurting economic growth."
Note that all 10 regions covered are now in the red, and for the most part, rather deeply; Only Chicago and Denver are off by less than 1%.
Click Here, or on the image, to see a larger, undistorted image.
via TFS Derivatives
Great Housing chart, from an article in the Sunday NYT:
Click Here, or on the image, to see a larger, undistorted image.
courtesy of the NYT
Incidentally, not everyone was crying wolf. Some of us were adducing significant data proving the point.
Such is the life of a skeptic . . .
Mortgage Withdrawals Driving UK Consumer Spending, Also
We have, for several years now, highlighted the significance of Mortgage Equity Withdrawal (MEW) in the U.S. as a major source of consumer spending.
As MEW slows, so too will consumer spending.
It turns out that this phenomena is not limited to the U.S.: In Great Britain, where nearly all mortgages are adjustable APRs, MEW has been a major source of fuel for their consumer spending.
From Monday's WSJ:
- "In the past decade, U.K. consumers have become more dependent on borrowed money, both to buy homes and to finance spending. As of July, total mortgage debt in the U.K. had reached £1.1 trillion ($2.2 trillion), more than double the level of 10 years earlier and equivalent to more than 80% of annual gross domestic product. In the first quarter of this year, U.K. homeowners tapped their home equity for about £13.2 billion, or 6.1% of disposable income, an indication of how much rising home prices have been raising consumer spending, which makes up about two-thirds of the U.K. economy."
- "Perhaps no company symbolizes the borrowing boom better than Northern Rock. In the late 1990s, the company became a pioneer in the securitization of U.K. mortgage loans, packaging thousands of loans into pools and selling the cash flows as securities to investors in the U.S. and Asia.
By tapping capital markets rather than relying solely on typical deposits, Northern Rock was able to expand at great speed. By June, it had about £87 billion in mortgage loans outstanding and had accounted for almost a fifth of new mortgage loans made in the first half. According to brokers, Northern Rock gained market share in part by taking risks— allowing home buyers, for example, to get loans covering as much as 90% of the purchase price.
Their mortgages "were prime, but they were operating at the outer limit of it," said Howard Cook, a partner at Talbot Insurance Services, an independent financial adviser in Cumbria, in northwestern England. A Northern Rock spokesman said the credit quality of the company's loans was solid, and that the percentage of loans in arrears was well below the industry average."
Sources:
Summer Swoon Evident in the S&P/Case-Shiller® Home Price Indices
Sep 25, 2007 09:00 AM EST PDF
http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_092512.pdf
S&P/Case-Shiller Home Price Index Falls 3.9% in July
Courtney Schlisserman
Bloomberg, Sept. 25 2007
http://www.bloomberg.com/apps/news?pid=20601087&sid=aqOuSeaFXx3Y&
They Cried Wolf. They Were Right.
VIKAS BAJAJ
NYT, September 23, 2007
http://www.nytimes.com/2007/09/23/weekinreview/23bajaj.html
Northern Rock May Point to U.K. Crunch
CARRICK MOLLENKAMP and MARK WHITEHOUSE
WSJ, September 24, 2007; Page A2
http://online.wsj.com/article/SB119058413986236614.html
Normxxx
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