Are We at the Bottom of the Market? Case Shiller Index Suggests So...

I'm not sure that you are looking at the data correctly. The actual index went down April to May.

NY-New York
NYXR
January 2008 200.65
February 2008 198.39
March 2008 196.47
April 2008 194.72
May 2008 193.91
June 2008 194.22

http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html

This shows a decline in every month except for May to June. Perhaps you are confusing the YoY numbers, which is the % decline off a decline...

the Case shiller index is a leading indicator--if it's going down, the market is going down. once it starts to tick back up, then you'll know.

I'm not so sure about the bottom yet. Did anyone see the graph in New York Magazine, Aug 11 issue, page 52. It features a graph by StreetEasy and says "new condo sales are likely, in the next few months, to drop by 75 to 80 percent". I'm not sure I really understand the graph though. Maybe someone could explain further?

How is it possible to call a bottom when prices are still dropping like a rock? How please tell me. And while your at it, please explain to me what a "recovery" is defined as? People talk about the bottom and recover as if they are connected. In fact on has nothing to do with the other. How about we talk about a recovery when the prices stop falling.

Once that it's clear that we have bottomed, lest shift to a talk about recovery. Because at 5% inflation, property values need to stop falling and then increase over 5% before a recovery can actually be recorded as such. Schiller, is still predicting a 20% decline, recovery is not any where in the near future.

"How is it possible to call a bottom when prices are still dropping like a rock?"

Are prices dropping like a rock? Where?

When you point out that actual sales indicate that the market is not dropping, you're criticized on the basis that recorded sales are a lagging indicator. Yet these same people will use even more speculative data and mere conjecture to claim that the market is falling like a rock.

The nationwide bottom is significant. Manhattan, as we all know, is doing well in this tough overall national market. Hopefull buyers are waiting for Manhattan to experience the same decline. The fundamentals of Manhattan real estate(lets just say cooop and condo boards) explain why this is not happening. Once buyers see the national market bottoming than they will think that Manhattan has weathered the storm. Now everyone and their brother will jump in to buy. And guess what bears...higher prices..so as more bottom talk works its way thru the media than more inventory will go down, as we are seeing now.

"lets just say cooop and condo boards"

condo boards have no power other than right of first refusal.

How can steveF of Ponzi Scheme fame claim that co-op boards are saving the day, while at the same time say (as he has) that foreigners are rushing in, when most co-ops don't allow pieds-a-terre?

stevejhx.....*COOP BOARDS PREVENT SUBPRIME LOANS AND INVESTORS*........even condo boards/banks require 20% down from investors and 10% from owner occupied buyers. There is nothing to spin here steve, it's not brain surgery........Steve are you a shill for Streeteasy?

Once again, real estate market watchers have pounced on a shred of seemingly positive news to proclaim that the long sought “bottom” is in sight. The routine is becoming extremely stale, but somehow the media never seems to tire of it. This time the “good” news was that the percentage declines in national home prices (according to Case Shiller) in July where not as large as they were in June. Although the report contained many other negative data points, including increased inventories and a spike in foreclosure sales, it was the slowing declines that got spotlight. Talk about grasping at straws. The truth is that real estate has been grossly overvalued for years, and the adjustment process back to realistic pricing has only just begun. The problem is few among us seem to appreciate the magnitude of this adjustment and its implication for an economy dependent on inflated assets values.

By most accounts, the decade long housing boom began in 1996 and finally went poof in mid-2006. In January 1996, the Case Shiller 10 city composite home price index stood at 76. By June 2006 it had tripled to 226, by far the largest increase in U.S. history. Since then, the index has pulled back by 20% to 180. For those who believed that home prices could never retreat nationally, this 20% correction is more than enough. In reality, it’s just the down payment.

When real estate prices were expected to rise in perpetuity, the price of a house had two components, one representing shelter and the other investment. The shelter component was the actual utility and desirability of the house and the investment component was the expected future appreciation. My guess is that at the peak of the real estate mania, a $500,000 house might have been comprised of $250,000 for the shelter component and $250,000 for the investment component.

In effect, the appreciation potential, and the ability of the homeowner to tap into it though refinancing and home equity loans, offset the real costs of home ownership, such as mortgage payments, taxes, insurance, and maintenance. So the main reason a buyer would commit to a mortgage that would soak up 50% of his disposable income was that he expected to recover most of that outlay through future appreciation. Absent the expectation of that windfall, buyers would not have been willing to pay such staggering prices for houses or commit to burdensome mortgage payments.

Lenders were caught in the same delusion. Since they too believed prices could only rise, lending standards were thrown out the window. If the collateral (the house) were to always rise in value, what difference would it make if the buyer made the payments? In effect, instead of relying on the borrower’s ability to pay to mitigate its risk, lenders merely relied on the house’s ability to appreciate.

However, now that real estate prices are falling, lenders are beginning to rely solely on the borrower’s ability to pay. As this trend continues, lending standards will tighten and mortgages will be brought back into line with the incomes of borrowers. In addition, down payments will be larger to reflect the greater likelihood of losses should loans end up in foreclosure. When prices were rising the foreclosure risk was negligible. However, now that foreclosures are soaring and recovery rates are less than 50 cents on the dollar, those risks are enormous.

So with falling real estate prices, mortgages are much less appealing to both borrowers and lenders. The only solution is for home prices to fall to where they are cheap enough for buyers to afford the mortgage payments (both interest and principal) without relying on appreciation, teaser rates, or negative amortization, and save enough for a down payment that would protect a lender in the event of default. In addition, the collapse of the mortgage securitization market means houses must be cheap enough for our limited pool of domestic savings to supply the funding, as we will likely lose access to much of the foreign funding that fueled the bubble.

Of course we need to be honest about the winners and losers of this credit crunch. Just because mortgage money becomes scarce and lending standards tighten does not mean people will not be able to buy houses --it simply means they will pay a lot less for them and that fewer new houses will be built. Therefore it is sellers, builders and those holding or insuring existing mortgages who lose, while buyers win big. That is because despite higher interest rates and larger down payments, they end up borrowing a lot less money. In the end they will become true homeowners rather than indentured servants. If home ownership is truly is the American dream that so many realtors profess, then the ongoing collapse in home prices will be a dream come true.

-P.Schiff

Please, Schiff has been constantly cheerleading gold and oil while it continues to plummet in value, and telling people to avoid the dollar while it has increased in value.

but the numbers still show declines in every month but one.

i also noticed that the highest month was over 2 years ago, and the same for most other cities. So, even if now is the bottom, you are talking about 2 years to turn at least. If Manhattan is only starting to go down now, wouldn't that infer that we have at least that long to go there before things get better?

ROTFL....

"The nationwide bottom is significant. Manhattan, as we all know, is doing well in this tough overall national market. Hopefull buyers are waiting for Manhattan to experience the same decline. The fundamentals of Manhattan real estate(lets just say cooop and condo boards) explain why this is not happening. Once buyers see the national market bottoming than they will think that Manhattan has weathered the storm. Now everyone and their brother will jump in to buy. And guess what bears...higher prices..so as more bottom talk works its way thru the media than more inventory will go down, as we are seeing now. "
- SteveF... TWO YEARS AGO

whoops...

http://www.youtube.com/watch?v=JTMf40ORFE8&feature=related

alpine292..........the days of Uncle Alpie

Before he elected himself president and left us for a warmer reception elsewhere.

reminds me... we haven't seen perfitz in a WHILE now. I guess he's bankrupt on both sides of the country now.

Perfitz pumped and then dumped all of this NYC holdings... after he sold he was never heard from again.... it is great to know such a deceitful, self-serving individual is producing educational material for our children...

http://finance.yahoo.com/real-estate/article/111848/the-eight-states-running-out-of-homebuyers?mod=realestate-buy

I wonder what alpine292 has to say for himself today.

huntersburg is hfscomm1.