The Case-Shiller Home Price Index has increased yet again. This marks the fifth consecutive monthly increase in house prices in the United States. Prices are now only 11.3% lower in the Composite-10 cities and 9.3% lower in the more comprehensive Composite-20 cities than at this time last year.
However, diffusion is breaking down. When the Case-Shiller index began increasing in July, 14 of 20 markets were showing an increase. This number steadily increased as time wore on. Case-Shiller reported in August that 18 of 20 cities showed price increases. When Case-Shiller reported in September, 18 of 20 cities showed price increases.
Then, last month the number turned down slightly to 17 of 20 markets. This month the number really turned down. Only 10 of 20 markets rose in the data (for sales through September). That is not good. is this a one-month aberration? It’s hard to say, but clearly this should be worrying because bank collateral depends on it. Homeowners looking to escape negative equity depend on this. And renewed declines will most certainly have a negative effect on consumer confidence.
If house prices start to decline again, it would be a harbinger of very bad things to come.
