As is the case on the last Tuesday of every month, the Case-Shiller Index is published with commentary by Standard and Poor’s. For the 8th consecutive month, the index posted a decline. “‘There is very little, if any, good news about housing. Prices continue to weaken, trends in sales and construction are disappointing,” David Blitzer, chairman of the Index Committee at S&P Indices, said in a statement. “Recent data on existing-home sales, housing starts, foreclosure activity and employment confirm that we are still in a slow recovery.'” And as is always the case, the headline says it all right? Well not always.
As I have often noted here in The Real Estate Conversation, real estate is local. If we look at Detroit for example, it hardly paints the same picture as D.C., which actually posted a gain. And while SF and LA remain down as a whole, if a stat was kept on the coastal areas of California, which there is not, I presume the numbers would fare much better. So while Mr. Blitzer is partially correct in saying “there is very little, if any good news about housing” he is incorrect when he states, “if any”. Why? Because there is some good news, or at least it isn’t all bad news. California for example boasts retention of a 68% increase in value since 2000. That’s good news… Los Angeles and San Francisco MSA’s (Metropolitan Statistical Area) show seasonally adjusted declines of a modest .1% and that is not bad news either.
Additionally, the idea as Mr. Blitzer suggests in his statement, that the fact that we are in a “slow Recovery” is somehow a bad thing, I say, “How’s that”? Can you think of any real, substantive recovery that isn’t or shouldn’t be slow? The media and financial market’s obsession with a quick fix, an overnight rally, a “boom” return to the “way it was”, shows an incredible lack of foresight and the fundamental problem with Wall Street. I’d like to find this statement shocking from S & P, but I don’t because after all, S & P is the same organization that valued those crummy derivative MBS’s (Mortgage Backed Securities) investments, as of the same caliber as those of high quality; a point almost completely overlooked in the blame game for the whole mortgage meltdown by the way.
OK, granted, a small improvement would be welcome news indeed, however a slow recovery based on fundamentals and not artificial government stimuli (think Housing Tax Credit 2009-10) is not bad really. Moreover had the Housing Tax Credit never been enacted, prices would have likely declined further in 2009-10 and had that been the case, the year over year numbers would look very much different indeed. In fact this is a very important fact worth re-stating another way: Last year’s values were artificially elevated due to the Federal Tax Credit, so the year over year numbers, should look worse if we are to expect natural market forces to take over. If you like me, are on a low sodium diet, consider the whole of Case-Shiller’s statement on the last Tuesday of every month, not just the sound bites, and I think you’ll agree that, that’s a grain of salt worth taking.