October 27, 2010
The Washington Post headlined an article on the release of the Case-Shiller 20-City house price index for August: “house prices up less than projected.” Actually house prices fell by 0.2 percent in August, with prices dropping in 15 of the 20 cities in the index.
The reason that Post reported prices as rising is that it was referring to the year over year change. This measure focuses on old information. We already had data on 11 of the 12 months over the last year. The new information is the August data, which is clearly most relevant for the future direction of house prices.
The article also includes the strange comment that: “In addition to unemployment, concern over deteriorating property values may also be weighing on Americans’ psyche.” Falling house prices affect Americans’ wealth, not just their psyche. As a result of the plunge in house prices since the partial collapse of the bubble, households have seen a decline of close to $6 trillion in their wealth. This means that they have less ability to spend.
It is also surprising to see that the Post believes that the August data was more negative than “projected.” The paper should stop relying exclusively on experts who failed to see an $8 trillion housing bubble.
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