Tuesday, 30 October 2007

Case-Shiller Index falls for 8th consecutive month

From Bloomberg:

S&P/Case-Shiller Home Prices Fell 4.4% in August

Home prices in 20 U.S. metropolitan areas slumped in August by the most in at least six years, a private survey showed today.

Values dropped 4.4 percent in the 12 months that ended August, an eighth consecutive decline, according to the S&P/Case-Shiller home-price index, which has data back to 2001.

The figures reinforce the view among Federal Reserve officials and Treasury Secretary Henry Paulson that the housing slump has further to go. Near-record inventory levels suggest sellers will continue to lower prices, posing a threat to consumer spending because homeowners will have less equity to borrow against.

"This is really the No. 1 risk: a sustained, sharp decrease in home prices really squeezing consumers," said Meny Grauman, an economist at Scotia Capital Inc. in Toronto.

Economists forecast the gauge would decrease 4.2 percent, according to the median of 11 estimates in a Bloomberg News survey.

The group's 10-city composite index, which has a longer history, dropped 5 percent in the 12 months ended in August, the most since June 1991.

Compared with July, home prices in the 20-city index fell 0.7 percent after a 0.4 percent decline the month before. The figures aren't seasonally adjusted, so economists prefer to focus on the year-over-year change.

No Positive News

"The fall in home prices is showing no real signs of a slowdown or turnaround," said Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, in a statement. "There is really no positive news in today's report."

Shiller and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.

The index is a composite of transactions in 20 metropolitan regions. Fifteen cities showed a year-over-year decline in prices, led by a 10 percent drop in Tampa, Florida, and a 9 percent decline in Detroit. The area showing the biggest gain was Seattle with a 5.7 percent increase.

Most economists expect housing to extend its slump and continue to be a drag on economic growth as loan foreclosures rise and tougher lending standards make borrowing more difficult.