Case-Shiller Index lowest since Jan 1987

The above chart courtesy of the BIG PICTURE shows home prices are down in all 10 major cities of the Case-Shiller home price index year on year in June. The following comes from the press release:

“The pullback in the U.S. residential real estate market is showing no signs of slowing down,” says Robert J. Shiller, Chief Economist at MacroMarkets LLC. “The year-over-year decline reported in the 2nd quarter of 2007 for the National Home Price Index is the lowest point in its reported history, which dates back to January 1987. On a regional level 17 of the 20 metro areas are showing declines in their annual growth rate from what was reported in May.”

During this cycle, Boston was the first metro area to report negative year-over-year returns, back in April 2006. In June 2007, Boston showed an improvement in its annual rate of decline from the value reported in May, –3.9% versus –4.3% reported in May. Boston has shown improvement since the beginning of the year, where its annual growth rate measured –5.5%. More data however, is needed to determine whether Boston, whose growth rate turned negative before other metro areas, is truly the first metro area to turn around.

Shiller also appeared on Bloomberg yesterday and made an interesting observation. He said that according to surveys of households that people are still quite positive about home price appreciation. Shiller was quick to point out that what noone seems to be considering is that house prices may well decline for the next 5 years. That may sound radical but as Shiller points out that is exactly what happened between 1989 - 1994.