June Case-Shiller Index

Submitted by Rich Toscano on August 26, 2008 - 5:38pm

The aggregate index was down for another month, dropping by 1.5%. But what's this? The monthly change for the high-tier index doesn't have a minus sign in front of it? I'm confused...

But it's true. The high tier of the Case-Shiller index managed to stage a spring rally. A late one, and a very small one -- but hey, it's something. The high tier rose .3% from June. The middle and low tiers were down, however, 1.6% and 2.4% respectively.

My Case-Shiller proxy, which utilizes the median price per square foot, predicted a 1.6% decline in the overall index for the month vs. the actual 1.5%. So this proxy still seems to be working pretty well, at least for the time being. The aggregate index is down 29.5% from the November 2005 peak.

Some graphs follow: the first two nominal, the second two adjusted for CPI inflation.

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Submitted by peterb on August 26, 2008 - 11:29pm.

And the train keeps rolling on down the tracks. Wow. Who'd have thought this would happen back in 2006? I thought it was shakey, but not like this!!
Given that the CPI is basically a fictional number seriously watered down by the govt for the past 15 years...the real inflation adjusted numbers are probably around 50%....amazing!!

Submitted by orthofrancis on August 27, 2008 - 6:26am.

I'd have to agree. The cyclical pattern of the Case-Shiller graph shows the spring rallies each year, but this years high priced tier "rally" is tiny!
2011 is a long way away- I just wonder if we are in for a Tokyo type of prolonged bottom after the number finally equalize.

Submitted by Huckleberry on August 27, 2008 - 7:53am.

Elliot Wave Theory leads me to speculate that the higher priced tier will experience is biggest fall between this Sept and next April, as the third wave down is typically the worst as the market psychology reaches capitulation.

However, if credit markets continue to tighten and interest rates creep higher, this third wave down will be more prolonged and pronounced.

You notice that low priced and mid priced do not exhibit "waves" at this point. My theory for this is that they did not "stretch" their cycles, they violated their technical and fundamental trends and exploded into a bubble, just like when a stock explodes from a Bollinger band volatility consolidation. Eventually it has to come back to equilibrium to "check" it's true value against investor sentiment. The RE market is no different.

Once the lower and mid tier start to stabilize is when I would consider that the first wave down for those markets. However, considering their immediate (most recent) decline back into their cycles would lead me to beleive their third cycle will not be as significant as the high priced tier.

This could very well take 3-5 more years to fully play out, as their are no rules related to how long "waves" can last, nor their velocity.

Submitted by jimmyle on August 27, 2008 - 8:51am.

How is this 'July rally' for the high tier compared to its 2007's July rally?

Submitted by cr on August 27, 2008 - 10:18am.

We rallied in spring of '06 and fell hard. We rallied in spring of '07 and fell harder.

I'm going to guess with the economy and job market the way they are this next drop will be even harder.

To answer your question jimmyle the high tier in the same May-June period last year was up 0.41% vs 0.3% this year.

This good news will likely be spun as the bottom, as I'm sure it was last year, and IMO is likely to fall even further.

Submitted by peterb on August 27, 2008 - 10:47am.

Huckleberry,

I am a follower of ElliotWave, and it looks like we have a third wave in almost all asset classes right now. And I think this one may be unavoidable in terms of postponing it or elongating it anymore. So I agree that it's coming, but how do you figure it's due sometime between this Sept and April? My gut tells me that you're probably right, but my guts been especially sensative lately.

Submitted by jimmyle on August 27, 2008 - 11:10am.

5% annual fall after the 2006 rally
23% annual fall after the 2007 rally
??% annual fall after the 2008 rally

Are you saying that price reduction for the next 12 months will be even greater than 23%? Don't you think as we are approaching the bottom the curve will ease up a little bit? Being a renter and potential first time buyer, I would be thrilled if it falls another 15% 12 months from now but I am hoping for a bigger drop like you said.

cooprider wrote:
We rallied in spring of '06 and fell hard. We rallied in spring of '07 and fell harder.

I'm going to guess with the economy and job market the way they are this next drop will be even harder.

To answer your question jimmyle the high tier in the same May-June period last year was up 0.41% vs 0.3% this year.

This good news will likely be spun as the bottom, as I'm sure it was last year, and IMO is likely to fall even further.

Submitted by peterb on August 27, 2008 - 11:47am.

Jim,
Insiders are saying that we'll have at least 200 bank failures, and quite possibly closer to 500 in the not too distant future. I think you're analysis is on-track. Add up all the economic factors and I doubt you'll be able to find anything that says we're anywhere near the bottom.

Submitted by 4plexowner on August 27, 2008 - 3:13pm.

Nearing a bottom? Thanks for the belly laugh ...

Submitted by jh on August 31, 2008 - 11:26pm.

Where do you exactly find the differentiations in high-tier and low-tier for the Case-Shiller index? Can someone explain this to me? When I look at the Case-Shiller index, I only get one reading.

By the way, the June 2008 Case-Shiller index as far as a momentum reading was the worse yet. I suspect this fall and winter to be the worst we will see in a long time.

Submitted by Rich Toscano on September 1, 2008 - 9:53am.

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