Case-Shiller: housing double dip threat as only 4 of 20 markets rise

Courtesy of Edward Harrison at Credit Writedowns

The December 2009 data for the widely followed S&P/Case-Shiller Indices were released this morning. The data are showing a mixed picture. On the one hand, the unadjusted numbers are down on both a month-to-month and year-over-year basis (Composite-10 and Composite-20 respectively down 2.5% and 3.2% versus December 2008). Only four of twenty markets saw price increases. However, the seasonally-adjusted data do show a slight improvement in markets on a month-to-month basis, despite year-over-year price declines.

Below are the non-seasonally adjusted data:

What is clear from the numbers is that the markets in which prices are now doing the best are mostly the same ones that had both experienced the greatest carnage and had also experienced a prior price bubble. This includes Phoenix, LA, San Diego, San Francisco, and Las Vegas. You see yearly home price increases in California for example. Moreover, the only four markets where prices increased month-to-month were in the previously devastated bubble markets of Phoenix, Las Vegas, San Diego and Las Vegas.

The breadth of price increases has now narrowed to 4 of twenty markets. And that has to be worrying whether you are looking at unadjusted winter month data or seasonally-adjusted data. Since June, the number of markets in the Composite-20 where prices have risen has gone from 18 in June to 18 in July, 17 in August, 10 in September, 8 in October, 5 in November and 4 in December.

Some analysts are unfazed by the fall in the number of markets with price increases. They believe the declines are seasonal in nature and that by Spring the market will be back to rising modestly. However, I believe a housing double dip is a distinct possibility given recent concerns about shadow inventory, strategic defaults and rising option-ARM resets.

The underlying U.S. economy sans fiscal and monetary stimulus is weak. Moreover, U.S. consumer confidence is fragile. In this environment, any renewed price declines in home prices will leak into the real economy. So, this data series bears watching.