Home Price Index Makes New Low in January, Annual Decline Possibly Leveling Off (ITB)

S&P/Case-Shiller Home Price Index (pdf)
The S&P/Case Shiller Home Price Index made a new low in January (chart on the right), which isn't a good sign for the $717 billion in negative home equity outstanding.

"S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed annual declines of 3.9% and 3.8% for the 10- and 20-City Composites, respectively. Both composites saw price declines of 0.8% in the month of January."

I guess you could say it is positive that the annual decline seems to be leveling off (chart below). Detroit led the composite with a 1.7% annual gain, followed by Phoenix and Denver with gains of 1.3% and 0.2%, respectively. I wonder if anyone made money on that IndyMac foreclosed home in Detroit that was going for $600.

S&P/Case-Shiller Home Price Index (pdf)
On March 26 on Breakout TV, Stan Humphries, chief economist at Zillow, said he (Zillow) expects home prices to fall by another -0.7% in 2012, which was revised lower from -0.2%. But in 2013, Humphries thinks housing goes back to "being a non-depreciating asset" at below trend growth (1.0-2.0%) until 2016, as negative equity continues to push foreclosed homes onto the market and high unemployment remains a risk. But after 2016, Humphries believes home prices will grow at an annualized rate of 2.5-5.0% (the norm), which was half the rate seen during the housing bubble (5-10%). Watch the video: Breakout TV: Home Prices Set to Drop Again in 2012: Zillow.

We shall see. I say keep watching the annual percent decline for improvement. As for the near term, lumber futures prices from a year ago could be predicting weakness ahead for housing stocks. Read: McClellan Financial Publications: Lumber Says This Is A Top For Housing Stocks. That might explain why volume spiked in KB Home's stock and put options on 3/23, and why cancellations rose during the quarter. ITB and DHI (DR Horton) also have large amounts of out-of-the-money puts open on one strike that expire on April 20. I'm not sure when those puts traded, but the KBH puts that traded on 3/23 are in the money.

Here's an 8 year chart of ITB, the Dow Jones U.S. Construction Index. It looks like the "FORCE" indicator is rising again, and it's interesting that the 50 week moving average is brushing up against the 200 week. ITB is testing the 2010 high.

ITB - StockCharts.com

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