Tweet me!Click any graph to expand.
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Despite this, significant headwinds persist in inventory, foreclosure and distress pipelines, unemployment, etc. Yeah, I know, you have heard this all before, but let's put it in context this time around.
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This chart shows us the month to month changes over the same time period. As you can see, last year was bad, but we again ticked up significantly for several months in a row for an improvement. That improvement has quickly disappeared with several markets dipping back into the negative. and all markets trending sharply downward. This is a negative, not a positive turn of events. Put this in perspective, with hundreds of billions of dollars of government aid, MBS purchases, tax credits and bank support - we are still seeing this sharp month to month downtrend. It is no wonder why the housing tax credit was extended, but to what good?
As we drill down on the trend view, we can see that the upward trend in most markets has stopped, with a few markets actually turning back down again, and right after the spring/summer selling season and the perception of the proximal expiration of the tax credit. This is a negative, not a positive turn of events.
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The chart below illustrates the seasonal ebbs of month to month price changes. On a month to month basis, we see hills in the spring and summer and valleys in the fall and winter. During the onset of the bursting of the (first) bubble, this cycle was compressed, but was still there. and lasted throughout the bubble. With the onset of the government stimulus (ex. housing credits and MBS market manipulation), the peaks were significantly exacerbated. Now we are entering into the winter months again, and guess what's happening, as has happened nearly every winter cycle before. The only difference is that this dip is extraordinarily steep! I would also like to add that the month to month price changes coincide exactly with the S&P 500 move downward and upward for 2008 and 2009, to the MONTH! What a coincidence, huh? If this relationship holds,,,, well you see what direction the month to month lines are going and how steep they are, don't you?
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As you can see when we drill down into the month to month numbers, the improvements either weaken significantly or disappear into numbers that show further declines - and this is in the face of government bubble blowing!
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Let's chop the data up using bar graphs that give the reader a greater feel for the seasonality of the moves, and you will still find the latest numbers showing what looks like a downtrend, again...
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Remember, the CS index measures matched sales pairs. That means that it attempts to follow the same properties being sold, so the seasonality will mean much less than if one were simply measuring transactions, irrespective of the property. The seasonally adjusted numbers look more positive, but still show a downtrend. Since I could not find the specific methodology on the "de-seasoning", and I am easily able to discern the seasonal trends over time, I am much more comfortable with the raw index data.
So, what does it mean if we get another significant downturn? Well, not only are the 2003 to 2007 vintage mortgages in trouble, but those 2008 and 2009 mortgages are at risk as well. What are the chances of this happening? Fairly significant. For all of those guys who swear we are on the brink of a booming economic recovery, recall that it was housing depreciation that set all of this off to begin with. It was not a dip in GDP, not unemployment, not a dip in corporate profits, definitely not a change in analyst's earnings forecasts and not a crash in the stock market. It was a crash in housing. What happens if we get another housing crash (or more accurately put, the continuing of the current one) after a few hundred billion of stimulus and a 62% run in the S&P to guarantee that the stocks are nice and ripe in their overvaluations? Inquiring minds want to know...
