House Prices Slip Again

It is worth noting today’s Case-Shiller index report. Home prices slid slightly again in November, the latest month for which we have data. The decline was slight at -1.0%, but it adds to a series of bad months recently and means that the year ended in November 2010 saw a 1.6% decline. So housing lost all the steam it had at the end of 2009 and early 2010 when the government stimulus was adding demand via a tax credit for first time home buyers. With that support gone, and with unemployment stuck at high levels, wages less robust than is normal in a recovery, and households still worried about debt levels the downward move in home prices has re-asserted itself.

For the year ended last November only the large California cities and Washington DC saw any sort of price gain. San Diego was the leader on the west coast with a 2.6% gain, but DC led the way at 3.5%. The rest of the country, especially the overbuilt South saw some sharp declines. Atlanta was worst hit with a -7.9% drop. And poor old Detroit is stuck in seemingly terminal decline: it saw prices drop another -7.1%.

We don’t need to add much to this, other than to note that housing simply doesn’t look like a source of strength this year. Prices are still weak. The balance in the market favors buyers. There remains an overhang of both unsold and foreclosed properties, with declared inventories still way above normal levels. Add in the so-called shadow inventory of homes that would be for sale in a healthy economy, and the outlook is just grim.

For buyers: the choice is yours.

For sellers: that price you have in mind is most likely fiction.

Meanwhile the banks aren’t helping. Having brought the economy to its knees through its monumental stupidity, the banking industry is doing its absolute best to prevent a recovery by establishing stifling credit standards. Speaking from my own experience: this is typical. The banking industry is a commodity business prone to massive shifts in herding instincts. It regularly drives off the cliff, takes us all down with it, then lectures us on our indebtedness as we try to re-build in the aftermath.

Banking is an unstable business. Along with its feeder system of rating agencies, accountants, and lawyers no one should pay much attention to what any of its leaders say. They are congenitally incapable of long term thought.

But who needs to think long term when the government is always ready to bail you out?

See: I knew it wasn’t the bankers fault. It never is.