Tuesday, April 01, 2008

United States Market update from U.S. data

What is happening in the US financial market's these days?

Two U.S. house price measures are released today. The first one, the S&P Case-Shiller house price index, showed yet another decline, which was a little worse than expected. House prices for the country's 20 largest metro areas fell 2.4% in January, the 18th straight drop in a row, and are now 10.7% below year-ago levels. The month-to-month and the year-over-year declines were the largest in this particular measure's 8-year history. Data for the 10 largest metro areas go back farther (to 1987) but the story was, yet again, the same. Prices were down 2.3% in January, or 11.4% y/y.

There is always lots of interest surrounding which areas were the hardest hit. Of the 20 metro areas, Charlotte is now the only areas with home prices not below year-earlier levels (they're up 1.8% y/y). Portland and Seattle had been above water in December but have now joined the ranks in negative territory. Miami and Vegas are neck-in-neck at -19.3% y/y, followed by Phoenix at -18.2% y/y. According to recent stories, foreclosed homes may have a hand in this, as banks are becoming more aggressive in pricing these homes appropriately and getting them sold.

The S&P Case-Shiller house price index is "the most reliable means to measure house price movements" as it measures repeat sales (it looks at the price for a single-family home that has been sold at least a couple of times before, in order to measure how much it has appreciated or depreciated) for all financing types (conforming, subprime, Alt-A1). Given that, further declines are coming…..the 3-month annualized trends are looking worse (-23.2% a.r. for the 20 major metro areas, and -23.7% a.r. for the 10).

The Bottom Line: U.S. house price deflation continues. Prices have to decline further to soak up the glut of homes for sale.

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A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate

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