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Home Prices Down 18.1 From Last April: Case-Shiller June 30, 2009

Posted by John Watch in News Feed.
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Home Prices Down 18.1 From Last April: Case-Shiller

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Several recent comments regarding the availability of financing have emerged over the past weeks discussing mortgage rates and the ability to sell/buy real estate. Contrary to popular belief, mortgage rates have more to do with the long term debt obligations of the United States, than the current value of real estate. A review of 30 year T-Bills indicates a concern of investors regarding the debt the United States is taking on. This is also reflected in the value of the American dollar, which has declined over the past several months.

In regards to mortgage financing, the markets did not stop; instead the markets went back to operational practices of 2002/03. The United States housing market is on track to sell over 4 million properties this year and the mortgage industry is on track to refinance double that number of properties. This represents about 12% of the residential housing market (4% sales and 8% refinancing).

Homeowners are receiving financing, but not necessarily at the numbers they had hoped for. Secondly, public records show that property values are down because of the median sales price. The much discussed Case-Schiller Housing Index does not place a relationship of sales price to the size of the home.

Now many economists and bloggers will state that there is no relevance in Sales Price to Square Footage. Based on property data, we state that there clearly is: Square Footage does matter.

In studies just completed, 15 of 20 major metro areas have experienced a decline in sales price compared to last year and to 2006. But the properties being sold are also smaller and by as much as 15% to 20%. As such, the decline in actual value is not as severe as reports that only analyze the Median Sales Price indicate. The real estate market is not absolute. The base data from 2006 is different than the data from 2009.

So what is the real decline in housing values and what is the real erosion of the under lying housing market? Well it depends on if you do the research or if you are an investor looking to snap up properties at bargain basement prices because incorrect information is being fed to the masses.

Conducting comprehensive research takes time and money, but many of the comments I read just rip into the process, as opposed to trying to understand the process. The markets are in flux and need some clear direction, but if we continue to post inaccurate information we will not see a housing recovery take foot for months.

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1. Case-Shiller Index Faulted by Founder Robert Shiller? « AccuriZ - September 22, 2009

[…] Is the Case-Shiller Index included in his broad statements?  Some economists argue that Case-Shiller is one of the faulty models that contributed to the increasing optimism and rising speculative prices in the market; as well as the panic and fear when the markets began to decline.  (Case-Shiller articles). […]

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