Life After Case-Shiller Report: Projecting Trends

While the Case-Shiller indexes reported new lows for house prices for the end of 2011, responses from analysts are mixed when determining what the data means for home values in the long run. Experts representing Capital Economics, IHS Global Insight, and Standard and Poor’s assessed the implications of the data for the future.

Patrick Newport, U.S. economist for IHS Global Insight
“The Case-Shiller indices are slipping-just about everywhere-but they are not in a freefall, as they were in 2007 and 2008. That is one reason not to sound the alarm bells. A second is the reason the indices are declining-they are heavily weighted with homes sold at distressed prices.”
David M. Blitzer, chairman of the Index Committee at S&P Indices
“With this month’s report, we saw all three composite hit new record lows. While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended.”
A continuation of this trend…or an end
Capital Economics
“Although the rate at which house prices are falling accelerated at the end of last year, it may only be a few more months before the decline seen over the last five years comes to an end. We expect prices will be broadly unchanged this year and next.”
“That’s not to say that prices will soon rebound rapidly. With another three million owners likely to succumb to foreclosure and demand severely constrained by over 20 percent of mortgage borrowers having a loan worth more than their home, significant and sustained gains in prices probably won’t be seen until 2014 at the earliest.”
Patrick Newport, U.S. economist for IHS Global Insight
“According to the Mortgage Bankers Association, 12 percent of homeowners with mortgages (i.e., more than 6 million homeowners) were either delinquent on their payments or in foreclosure at the end of the fourth quarter. According to CoreLogic, about 22 percent of residential properties with mortgages were underwater at the end of the third quarter. Add to this the currently high unemployment and underemployment rates, and tight credit conditions, one gets a recipe for further price declines. Our view is that foreclosures, excess supply, and weak demand will drive home prices as measured by the Case-Shiller indices down another 5–10 percent.”
David M. Blitzer, chairman of the Index Committee at S&P Indices
“In general, most of the regions also posted weak data in December….The pick-up in the economy has simply not been strong enough to keep home prices stabilized. If anything, it looks like we might have reentered a period of decline as we begin 2012.”