Yesterday, being the last Tuesday of June, was, obviously, the day they released the April Standard & Poor’s/Case Shiller Home Price Index numbers. If you are a regular reader of this blog you know I think this is just about the only useful data we get on the housing market. And house prices aren’t just important to us consumer-homeowners, they are central to the whole Great Recession thing.
Judging by Tuesday afternoon headlines, the data wasn’t so good. "U.S. Home Price Declines Moderating, Index Says" leads the story in The New York Times. The Wall Street Journal has "Home Prices Drop at Slower Pace", Bloomberg tells us "Home-Price Slide Eases" and the Boston Globe carries a story with the headline "Home prices post 18.1 percent annual drop in April".
I include what my increasingly pathetic hometown paper said (it was just running the AP story) because:
1. An "18.1 percent annual drop" would mean to most people that April was down from March on an annualized rate at 18.1%, not, as they meant, down 18.1% from April 2008. In this case that’s a big difference. April was down –0.6% from March, which annualizes to –7%. Not that you had any chance to work that out for yourself, as the monthly number is not in the AP story.
2. House prices here in Boston were actually up 0.4% for the month, a fact you might think they’d sneak into the story somewhere. Perhaps it’s in today’s paper edition. I haven’t looked.
Overall, from the headlines and body of these stories a reasonable person would get the feeling that the reporters were trying very hard to positively spin a grim situation. We’re still going to hell in a hand basket, but more slowly than before. This coordination in message is not a conspiracy. All the stories are written based on the press release from S&P, and it was headlined "The Pace of Home Price Declines Moderate in April".
Trust no one and check the math.
Thankfully for us cynical geeks, in addition to the press release S&P makes available the index numbers in a spreadsheet. Download that, do some lightweight analysis, and you will find that the story is a lot more cheerful than the media would have you believe.
Firstly, the monthly decline really is a lot more moderate than it has been recently. It was down more than 2% in each of the six months from October ’08 to March ’09. And 8 of the 20 cities in the composite were up for April, which is better than the 3 in March and much better than the zero for each of the six months before that.
And then there is New York. The Big Apple is a bit of a special case because it has economic problems that are directly tied to the implosion of Wall Street in a way that the rest of the country’s are not. After holding on pretty well through the early years of the national decline, NYC house prices were down just -14.7% from July ’06 to December ’08 versus –27.1% nationally, they’ve been keeping up with national declines this year and were down –1.7% in April. (And the other way that New York is special is that its housing market it dominated by apartments, which are not included in the Case-Shiller indexes at all.)
But New York is also the largest weight in the 20 City Composite, at 19.4%. I am not suggesting that the 20 City Index isn’t the definitive and legitimate benchmark, but by my calculations the 19 City Ex-NYC Index was down only –0.3% for the month, i.e. New York alone represented almost half the national decline.
Moreover, as I mentioned in my last update on house prices, what S&P calls monthly numbers aren’t. These are the monthly updates of a series of three month moving averages. So what they call the April number is really the February-March-April number and the monthly changes are not March to April but January-February-March to February-March-April.
Do a little algebra and you realize that Feb/Mar/Apr vs. Jan/Feb/Mar is really April compared to January. Do more algebra and you will work out that if the three month moving average was declining at -2% a month for six months, and then lightened to –0.6%, it is very likely that the actual month over month number, April vs. March, which S&P does not disclose, was positive.
Now it must be pointed out that a similar moderation in the rate of decline of house prices happened last summer. The June ’08 index number was down only –0.5% and it looked a lot like things were turning around, just as it does now. Then the credit crisis hit and we got another wave of pain. So anything’s possible, but, as uncurmudgeonly as it is, I find myself rather optimistic on house prices just now.
And I’m not alone. The Shiller in Case-Shiller gave an interview yesterday on Bloomberg (long but worth it) in which he was, by his dour standards, almost giddy.