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Thursday, August 27, 2009


case shiller ticks up

it's fodder for optimism for those so inclined, but mark hanson anticipated and has been addressing what the uptick in the case shiller index means.

I have been waiving warning flags about this statistical house price appreciation for a few months now — since CA house prices started moving up in April — and finally this month some of the larger research shops have started to point to the same things. These are absolutely unprecedented in nature and are wreaking havoc with reported house prices.

particularly interesting at econbrowser was the comment of jm, here appended.

Except in the low end of the market, stimulated by the $8k credit and "investors" scooping up foreclosures, hardly anything is selling here in the Chicago suburbs. Above $500k, especially above $600k, we have multiple years of inventory on the MLS even though only what absolutely has to be sold is listed -- sales rates are down nearly 80% from bubble peak. Yet the asking prices have still fallen very little, almost certainly because they are set by the amounts of the underlying mortgages, and the only way they can go lower is if the mortgage holder agrees to a short sale or forecloses and takes a loss on the REO. So the prices up in middle and high ranges of the market are not market-clearing prices -- only very few sales are being made, presumably to people who either feel they must buy or who think the market is going to come back soon.

Eventually, those homes are going to be foreclosed upon, and sold at much, much lower prices.

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