Economist's Commentary: October 28, 2008

Quick Take on the Economy: October 28, 2008

By Danielle Hale, Research Economist

Unsurprisingly, Case-Shiller data for August showed year over year declines in house prices. The 20-city index showed a decline of 16.6 percent in prices from August 2007 to August 2008 while the 10-city index declined 17.7 percent.
By comparison, NAR's median home price in August was $203,100 a decline of 9.5 percent from a year earlier. NAR also released more recent data this past Friday that showed a median price of $191,600 for September, a 9.0 percent decline from September 2007.

After rising from June to September, the Consumer Confidence Index fell sharply to a level of 38.0 in October-the lowest level since 1967. Rocked by the financial crisis, consumers have become uncertain about business and employment conditions.
The Consumer Confidence Index is composed of two component indexes-one for the present situation and one for expectations. The index for the present situation, which was relatively stable during the summer, fell to 41.9 in October while the expectations index, which like the overall index increased from June to September, fell to 35.5. The expectations index, again like the overall index, is at an all-time low, while the present conditions index is still above lows hit in 1992 and well above all-time lows.

Declines in house prices are good for clearing inventory from the market and boosting home sales, but their effect on home owner and consumer confidence can be unsettling. One positive note is that consumer expectations for the future have tended to bottom in the middle of a recession. With consumer expectations at all-time lows, perhaps a bottom is not far away.
In my last quick take, I noted that FHFA showed a smaller monthly decrease in home prices in August than in July. NAR data in August and September and Case-Shiller data from August still show larger declines but the rate of acceleration has slowed.
NAR's data was the first to pick up on declines in the housing market. Whether NAR data is first to pick up on improvement in prices or not, NAR economists are monitoring all data sources to keep you informed.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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