Housing double dip already underway

This morning the Case Shiller Index for February confirmed that the ongoing decline in home prices in the US is still underway:

““Beginning last November, each report showed gains as fewer cities reported year-over-year declines than in the previous month; those gains ended with this report. Further, in six cities prices were at their lowest levels since the prices peaked three-to-four years ago. These data point to a risk that home prices could decline further before experiencing any sustained gains. While the year-over-year data continued to improve for 18 of the 20 MSAs and the two Composites, this simply confirms that the pace of decline is less severe than a year ago. It is too early to say that the housing market is recovering” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Nineteen of the 20 MSAs and both Composites declined in February over January. Fourteen of the MSAs and both Composites have now
fallen for at least four consecutive months. In addition, prices reached recent new lows for six cities in February – Charlotte, Las Vegas, New York, Portland, Seattle and Tampa – sending a more cautionary message compared to the annual figures.”

Just as equity investors worry about a “double-dip” in stocks, several housing markets are already exhibiting the troublesome pattern of renewed declines. See this CNBC slide show: America's Double Dip Realty Markets.
It is important to note that this morning's Case Shiller report shows prices up to the end of February 2010. This means prices were still falling even before the government stopped buying mortgages in March and before the home buyer tax credits expired this month, and well before the 6 million+ homes now in default and various stages of foreclosure come back on the market. The Q1 US Census data reports some 19 million homes in the US are now sitting vacant, and this compares to just over 1.4 million homes that were reported vacant before 2006. Safe to say, millions of homes coming up for sale will continue to place downward pressure on prices for a good while yet. Eventually banks will have to acknowledge losses and mark their loan portfolios to market. Allowing them to “extend and pretend” is not serving any useful purpose in moving the crisis back to economic health.
I agree whole heartedly with Bill Fleckenstein’s comments this week that the SEC should sue the FASB for allowing banks to avoid fair disclosure accounting on the loan portfolios the past year:

The SEC also ought to consider pursuing the Financial Accounting Standards Board for helping denigrate accounting standards to the point that so much smoke and mirrors could pass for legitimacy.
Had real accounting standards been at work, they likely would have prevented the banksters from walking away with fortunes while they built financial instruments of mass destruction.

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