Home Prices Decline For 8th Month Straight; Close to Testing 2009 Lows

S&P’s new home price report confirms that home prices continue to decline, now that the effects of tax credits and failed mortgage assistance programs have faded:

Data through February 2011, released today by S&P Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show prices for the 10-and 20-city composites are lower than a year ago but still slightly above their April 2009 bottom. The 10-City Composite fell 2.6% and the 20-City Composite was down 3.3% from February 2010 levels.

sp-april-2011

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Housing Bubbles Around the World; Severe Corrections Still to Come in Canada, Australia, China, Sweden & Belgium

The Economist has a great interactive chart with home prices around the world.

A comparison of home prices to average income over the past 35 years in different countries:

global-house-price-comparison

Another chart gives us information about a few other countries, but data only goes back to 2001 for this comparison:

global-house-price-comparison-2001-2010

One thing I noticed in the chart was that Germany and Switzerland are the only countries where absolute home prices AND home prices in relation to average incomes have been declining constantly, at least for as long as data is available:

global-house-price-comparison-germany-switzerland

For Switzerland the available data actually goes back as far as 1991, with prices having constantly declined in relation to average incomes since then. For Germany data goes back to 2004 only. It seems like a bubble never really developed in these countries. Thus Germany and Switzerland may be interesting markets for global property investors at this point.

In Spain, Britain, Ireland, and South Arfica home prices still have a very long way to come down.

Other countries haven’t even yet begun to see the beginning of any meaningful correction in home prices, most notably Canada, Australia, China, Belgium, and Sweden.

People in those countries won’t be immune to the problems associated with building more houses than needed and/or can be afforded. Thus, expect significant corrections to begin soon in cities like Sydney, Melbourne, Vancouver, Toronto, Montreal, Stockholm, Shanghai, Beijing, Brussels, and the like.

The recent plunge in Beijing property prices may be a wake-up call for global property markets.

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Home Prices – July 2009

home-price-index-july-2009

Home prices nationwide continue to bounce back and have now risen for the 3rd month straight.

Top 3 monthly increases:

1. Minneapolis, MN: 4.58%
2. San Francisco, CA: 3.34%
3. Chicago, IL: 2.66%

Noteworthy: The only city there prices continue to decline is Las Vegas where home prices have dropped by 1.15% from last month.

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Home Prices – June 2009

home-price-index-june-2009

Home prices have risen for the second month in a row. The composite home price index rose by 1.46% from May to June. Home prices are still down 15.13% from a year ago.

Top 3 monthly price increases:

1. Cleveland, OH: 4.18%
2. San Francisco, CA: 3.78%
3. Minneapolis, MN: 3.38%

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Home Prices – May 2009 – Beginning to Bottom Out?

home-price-index-may-2009
Click image to enlarge.

On an annualized basis, overall home prices are down 16.83%. But compared to April they actually went up in May, by 0.44%. This is the first time since June 2006 that composite home prices have not posted a monthly drop.

Cities which still posted monthly declines were Phoenix, Los Angeles, Miami, Las Vegas, and Seattle. In all other major cities prices actually jumped up:

Top 3 monthly jumps:

1. Cleveland, OH: 4.12%
2. Dallas, TX: 1.88%
3. Boston, MA: 1.58%

Where prices still declined, the top 3 declines were as follows:

1. Las Vegas, NV: -2.58%
2. Phoenix, AZ: -0.85%
3. Miami, FL: -0.81%

Top 3 annual declines:

1. Phoenix, AZ: -34.17%
2. Las Vegas, NV: -32.01%
3. San Francisco: -26.15%

After 3 years, this is the first sign that home prices may be beginning to bottom out. It shall be pointed out that residential homes were the first asset class to fall, way ahead of everything else hit by the financial crisis. Thus it is just as likely that they will be among the first assets to bottom out while others continue to decline.

What remains to be seen is how the wave of foreclosures that has been paused via moratoria, will play out once it comes full circle.

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