Home prices are falling, indicated by weakness in preliminary January data from the existing home sales report and confirmed today by S&P Case-Shiller data for December that show a very steep 0.5 percent adjusted monthly decline for the 20-city index. The year-on-year rate ended 2012 with a minus 4.0 percent showing, two tenths steeper than the rate in November and the worst reading since, as the report says, the housing crisis began in mid-2006.
Unadjusted readings for the 20-city index, which are closely watched in this report, tell the same story with the year-on-year rate also down 4.0 percent and with the monthly rate down 1.1 percent (note that adjusted data, where the monthly decline is about half the unadjusted rate, compensate for cold weather effects on activity). A look across individual cities shows 12 of the 20 cities with adjusted monthly declines and some quite severe including Detroit at a monthly minus 3.5 percent, Atlanta at minus 1.3 percent, and Chicago at minus 1.1 percent.
Supply has been coming down in the housing sector which should help prices, though readings on supply in the existing home sales report are hard to gauge given uncertainty over hidden inventories of foreclosed properties. Lower prices are, of course, a negative for homeowners but on the positive side they will stimulate sales. Next data on the housing sector will be tomorrow's purchase index of mortgage applications, a reading that unfortunately has been trending lower.