Am I reading this wrong? Case-Schiller is accelerating downward?

Asked by Bp, Long Beach, CA Tue Apr 29, 2008

Wow, this means that the prices are falling even faster... Although CS is a lagging indicator. I don't know, to me it seems like the steeper the decline, the faster the bottom will be reached. There is a silver lining in these rapidly declining home prices, and that is that more buyers like me are likely to get off the fence and take the plunge. But I'd like to see CS index falling SLOWER rather than faster month to month - even YoY to take out seasonality, before making that commitment.

The tough part is going to be convincing owners in denial (including banks) that the prices of their properties are likely to drop another 20% at least before this train wreck starts slowing down. I guess that's where Realtors come into play - advising owners that a low offer now is better than the same offer in 12 months. Even trying to convince them that their asking prices are just hard to sustain in a market that is declining faster every month. Stay tuned! It's getting interesting...

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Liz Stevens, , Berkeley, CA
Wed Apr 30, 2008
The point of view of the Case Schiller economists is that the rate of decline will slow as we get closer to the bottom. The fact that it is accelerating, indicates a longer and steeper decline before it begins to slow.
2 votes
Newportfiji, , Long Beach, CA
Fri May 2, 2008
Apart from a few “the world is flat” realtors, everyone realizes that home prices are falling in Los Angeles County. As confirmed by Case-Schiller the rate of price decreases has increased.

Those that are expecting a quick turn around from this bubble are dreaming. The last cycle took about 11 years to reach peaking pricing from the previous peak. Here are your Los Angeles County vanilla medians between 1989 and 2000:

1989: $214,831
2000: $215,900

Pretty amazing, someone who purchased the “median home” for 214,831 sold for 215,900 11 years later. However, this bubble appears even larger that the 1989 run up as depicted in the following graph: . However, prices are falling faster, so perhaps we can reach a bottom faster.

In my opinion this would generally be a terrible time to “invest” in real estate, unless you must buy now (because of a 1031 exchange, for example). All leading indicators are pointing in the same direction as to the Los Angeles market, (i) inventory has increased, (ii) sales transaction volume has slowed dramatically, (iii) lending standards have tightened (pulling thousands of potential buyers from the market), (iv) notices of defaults and foreclosures are at records levels, (v) the economy is slowing (looking more and more like a recession) and (vi) literally thousands of high paying mortgage and other real estate related jobs have been lost in southern California over the past year. All of these things will put downward pressure on pricing for some time to come.

The reality is that prices will almost certainly be lower later this year, likely lower in 2009 and possibly even lower in 2010. Real estate cycles take many years to play out and we are at the early stages of a down cycle.

Best of Luck,
1 vote
Mike Simonsen, , Mountain View, CA
Sat May 24, 2008
You're not reading it wrong. However, you'd be crazy to use Case Shiller to try to call the bottom.

We spend a lot of time crawling through the numbers and you're going to find better leading indicator data in inventory levels, days on market and lots of other stats. The Case Shiller will be 6 months behind these other stats. Plus the CSI is regional and your local market may have nothing to do at all with the whole LA region. A good realtor will not only tell you those specifics about the local market, but they'll also be able to illustrate it. Anyway, if you want to look at stats for Long Beach in particular, our free research page is below.
0 votes
Eric Holsing…, , 33603
Wed Apr 30, 2008
Allow me to give you a perspective from the other coast. Case-Shiller should be used for investing in securities but taken with a grain of salt when considering buying or selling a home. I'm sure it's the same situation where you're at, one neighborhood will out perform another. So how then can we expect CS to accurately predictor of what's happening in your particular market, especially if your market is not covered in their data (e.g. condos, new homes, one of the states not included in their 10 major markets)? Not even to mention that the data is two months old.

Like politics, real estate is local. In the Tampa market, there are plenty of foreclosure, short sale and other distressed property deals to be found, but the prices on arm's length, market condition homes have not fallen nearly as much as CS indicates. In fact, the last couple of months we've actually seen increased sales. It's still too early to call it a trend, but the foreclosure rate is down, sales have increased, inventory is leveling. We may not have hit absolute bottom yet but there is NO data to support that we will a free fall as CS has predicted.

Also keep in mind that CS is used primarily by securities investors buying hedge funds against house prices. The worse the report makes it sound, the more scared people become....and the more money Shiller makes.
0 votes
Maggie, your…, , Long Beach, CA
Wed Apr 30, 2008
I am in the trenches every day. I mostly work with homebuyers and I can tell you that at the low end (below $300K) there are MULTIPLE OFFERS and even some crazy frenzy of overbidding. I believe we are reaching the bottom, as you so aptly put it very quickly. This is correct from being out there everyday. My homebuyers are definitely feel the URGENCY to make offers much more quickly than even 2 months ago.

My buyer pipeline is over 1500 strong so I have a decent sized sampling of the Long Beach market.
0 votes
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