Going on four years, we’ve been getting news from analysts and experts that the real estate world as we know it is coming to an end. I, as an eternal optimist, would constantly rebuff these views and look for the positive in any set of data. Today, the Case-Shiller index for February was released and by any means the numbers don’t look very promising.
According to the WSJ:
The S&P/Case-Shiller 10-city and 20-city indexes both fell 1.1% in February from a month earlier, not adjusted for seasonality. Prices in the index following 10 major metropolitan areas were down 2.6% from a year ago, while the 20-city index was 3.3% below the level recorded in February 2010.
No matter how the data is spun, it doesn’t sound good. For those of you who prefer visualizing the data, a graph from Fidelity shows the index data for the past 7-8 years:
For those unfamiliar with the way the S&P Case-Shiller Index calculates their data, the published data is a 3 month moving average in order to smooth out month to month variations. This generally leads to a more consistent index and one in which I would personally hang my hat on. As an aside, my senior honors thesis relied upon data from the Case-Shiller Index, so I have been intimately close with the raw data they produce.
Anyhow, as most people would imagine the Case-Shiller Index being among the most respected home pricing indices, has a real effect on the market and overall economy. Some aspects are directly correlated such as the fact that rents will typically escalate and decline in conjunction with home pricing (they are supposed to be substitute goods) and other aspects are less grounded such as the fact that ‘perceived wealth’ has an impact on a household’s spending habits. Lets hope that things turn around soon and don’t leave us in an extended recession ala Japan in the 90’s.