Posted by: Ben Steverman on December 26, 2007
The fate of the U.S. real estate market is crucial for the direction of the economy next year, and every week seems to bring some new sign of the pain in the housing sector. We received more scary data today. Nonetheless, now may be a good time to start ignoring housing data, at least for several months.
Before I explain, here’s more about the data released today: The monthly S&P/Case-Shiller Home Price index is supposed to be a better way to measure trends in the housing market. Using data on thousands of single-family home sales, it tries to track price movements in the two 20 metropolitan areas around the United States. Putting together this data takes a while, so the October index was only released Dec. 26.
The numbers aren’t pretty. Prices in all 20 cities fell from the month before. The top-20 cities fell 6.1% from a year ago, while the top-ten cities are down 6.7% annually, a record drop.
If home prices fall a few more percentage points next year, U.S. consumers may shrug off the hit to their net worth. But if the housing market really crashes — falling double digits — the economy’s troubles could snowball.
One problem with constantly taking housing’s pulse, however: The market tends to go into hibernation each winter. Housing data, like the Case-Shiller numbers, won’t really tell us what’s going on until the spring or summer, when sellers put out ‘for sale’ signs and prospective home buyers start touring homes again. Data from November, December, January and February are much less useful than from the summer months.
The housing market is already caught in a holding pattern as many buyers wait for prices to fall further and many sellers wait for a recovery. Eventually, that stalemate will break one way or the other. Which way? I don’t know because, even if it’s already clear that the housing market enters the new year with some very negative momentum, we’ll need to wait several months at least for a real picture of next year’s trends.