Case-Shiller Index

Posted by Ray on July 28, 2009 under Economy, Main | Be the First to Comment

Yup, another cheer leading piece from CNBC. Th Case-Shiller shows a slowing of home price declines, down 16.8% and 17.1% year-over year for the 10-city and 20-city composite, respectively. The rate of decent is slowing according to the report, but it looks pretty bad to me.

Considering that there are historically low interest rates on borrowing and government incentives, for first time homeowners, to buy properties this is a pretty dismal report. I guess it could have been worse, but nonetheless a 16 to 17% decline is not a good sign and even S&P says we have “a way to go before we see sustainable home prices.”. The index is down 33% for the 10-city and 32% for the 20-city composites from their 2006 highs.

While that is a steep decline it is not far enough compared to the huge run up in prices to begin with. Real estate is going to reach a bottom, but the bottom is likely far off considering these numbers are reflecting the prime time to buy a home. The numbers are likely to continue their decline as the home selling season cools down and the incentives die out.

The bottom line is the market is telling us we need lower prices, but the government continues to prop up real estate which has the potential to only make things worse. We are simply tying to rebuild the same bubble that pretty much wiped us out, except this next bubble will be not fixable and the government should see the error in its ways next time.

One last note, this time things are different than every other economic problem we have and those that think otherwise cannot see it or are ignorant to history.