US S&P Case-Shiller home prices fall as expected

The 20-city S&P Case-Shiller composite fell 17.4% y/y in September, while the 10-city composite fell 18.6% y/y. (Note: since the data is calculated using a three-month moving average, September is equivalent to Q3). The national composite, which has a broader geographic coverage than the composite measures, fell 16.5% y/y in Q3. Based on the national index, home prices are now 21% below the peak in the summer of 2006.

As usual, home price declines varied notably across regions, although of the 20 cities surveyed, 13 reported new record rates of decline in September. The most severe weakness was concentrated in the formerly bubble markets, such as Las Vegas and Phoenix, where home prices are down more than 30% y/y and nearly 40% from the peak. Cities in California and Florida are also experiencing sharply falling prices.

These bubble markets are battling with a flood of foreclosures that crowd out regular sales and depress home prices. In addition, home prices are still declining at a rapid pace in Detroit, which has fallen deeper into recession due to the struggles in the auto industry. On the other end of the spectrum, home prices fell by a more modest 2.7% y/y and 3.5% y/y in Dallas and Charlotte, respectively.

Housing demand has remained sluggish despite lower home prices, leaving inventories stubbornly high. We expect home prices to fall further, likely not bottoming until the end of next year, at the earliest. Michelle Meyer wrote in a Barclays Global report