Watching Paulson and Bernanke flail around has been a bit time consuming this month. While it’s still September, let’s get to the rodeo.
I’ll start with the Case-Shiller HPI model based on the size-adjusted median:
I’ve circled each August on the chart. The point is to show that we are just entering what — in the past two years, anyway — has been the seasonally weak period for prices. If the pattern applies again the price declines may pick up the pace a bit in the months ahead.
Here’s a look at the size-adjusted median for each property type:
The vanilla median looked pretty similar:
Sales volume was down a bit from July but still higher than in August 2007:
And inventory was flat for the month and, again, lower than in the past two years:
The months-of-inventory figure weighed in at 6.9 months — better than last year, as we’d expect from the above two graphs:
But overshadowing the seemingly reasonable level of for-sale inventory is the continued foreclosure pileup — both NOTs and NODs were a bit lower than in July but still ridiculously high in historical terms:
Between the unprecedented level of foreclosure activity and the weak local job market, it looks like more downward pressure is immediately ahead for San Diego housing.
Beyond that, who knows… I always thought the government would step in if the downturn got bad enough, but as cynical as I thought I was, I wasn’t cynical enough. I am amazed at the number, frequency, variety, and most of all the vast scale of the bailouts underway. There’s almost certainly more to come, too, and some of it may more directly target the propping up of home prices. Possibilities include the following:
- loan principal reductions (the government does after all pretty much own the mortgage market at this point)
- bans on new foreclosure activity (ditto)
- forceful lowering of mortgage rates (as suggested by Bernanke in his infamous 2002 speech on deflation)
- helicopter money (aka "stimulus checks", also proposed, more or less, in the same Bernanke speech)
- who knows what else
All in all, there’s going to be some serious distorting of the marketplace in the months and years ahead.
At least it never gets boring.