Case-Shiller Home Prices Report for May

TRADEX GLOBAL INTERNAL COMMENTARY

The Case-Shiller Index, which is a key measure of home prices in large US cities, rose 0.9% in May.  This was better than consensus, which was +0.4%. Home prices declined 0.7% YoY.  We continue to see a stabilization of prices as the massive shadow inventory is eaten into. Shadow Inventory is down 28% from its peak overall, and is down 52% from its peak in the West.  Interest rates continue to be at historic lows, and are expected to remain low for at least another year or two, adding to the affordability of homes. This news was relatively positive, inside an up & down earnings season.  Keep your hedges on… – Richard Travia

EXTERNAL RESEARCH COMMENTARY

U.S. home prices rose during May--the second straight month of improvement after a long streak of declines, according to Standard & Poor's Case-Shiller home-price indexes. During May, the Case-Shiller index of 10 major metropolitan areas and 20-city index each rose 2.2% from April. On a seasonally-adjusted basis, the improvement was 0.9%. On a year-to-year basis, the 10-city index and 20-city index were down 1% and 0.7%, respectively. U.S. home prices had risen 1.3% during April, reversing seven consecutive months of falling home prices. Demand for homes has continued to show some signs of stabilization, as record low mortgage rates, some loosening of credit conditions and improved job growth have pulled some buyers back to the market. Still, prices through May are down by about a third from their peak in June/July of 2006. "We have observed two consecutive months of increasing home prices and overall improvements in monthly and annual returns; however, we need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall," said David Blitzer, chairman of S&P's index committee. "The housing market seems to be stabilizing, but we are definitely in a wait-and-see mode for the next few months. Atlanta was the only city to post a double-digit decline during May, off nearly 15% from a year earlier, while Phoenix--one of the hardest hit cities during the downturn--again reported that stronger annual growth, up nearly 12%. However, prices remain down by more than half from their June 2006 peak.

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