Case-Shiller Comment--Worst Markets Recover

Most comment about the new S&P/Case-Shiller data is that it showed housing trends which were bad. The national index dropped 2% for the fourth quarter to the first and

all three headline composites ended the first quarter of 2012 at new post-crisis lows. The national composite fell by 2.0% in the first quarter of 2012 and was down 1.9% versus the first

But, at the city level, there was some improvement, particularly among metropolitan areas which have had high unemployment and sharp drops in home prices. The sole exception was the hardest hit of all markets–Las Vegas. The one year change from March was down 7.5%

In Detroit, long the poorest large city in America, housing prices recovered 2.3%, a miracle give the wreckage from the auto industry. Detroit does have the least expensive homes on average, among the twenty largest cities. A “value proposition” may have developed in the area with low house price combined with record low mortgage rates. Unemployment levels in the area have also rebounded strongly from double digit levels as some manufacturing jobs have returned.

Home prices in Phoenix, another troubled market with relatively low house prices which are only slighly above the national average, rose 6.1%. The Miami market, where homes are relatively expensive, also recovered with year over year prices in March up by 2.5%.

What is remarkable about this data is that these cities have all suffered badly economically, but that their relative home price values run across a large spread. Unemployment, therefore, may be a better marker for home price recovery than market size or home price.

Douglas A. McIntyre