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Banking Porn / What You Should Hate / September 29, 2009
By Yasha Levine


Once again, the Case/Schiller Index has lived up to its name. All summer long, real estate shills have used it to jack up homebuyer confidence and fluff the housing market. Now, they are doing it again. Just look at the bullshit headlines coming out today:

U.S. Economy: Home Prices Increase by Most Since 2005 . . . US home prices up for third month . . . Index shows home prices rose for 3rd month in July . . . Money Daily Brief: US home prices rise for third straight month . . . Home prices gain for 3rd straight month . . . Denver home prices rise again, getting closer to 2008 levels

Most of this unbridled optimism is based on the just released Standard & Poor’s/Case-Shiller’s U.S. National Home Price Index data for the month of July, which showed that home prices went up by 1.2% since June. A one-point-two-percent month-over-month increase? Ain’t that something!

Here’s CNN:

Home prices gain for 3rd straight month

Case-Shiller index shows 1.6% gain in July, a sign that recovery may be in motion.

By Les Christie, staff writer

Last Updated: September 29, 2009: 10:37 AM ET

NEW YORK ( — There was another tick-up in home prices in July, a further indication that housing markets may be stabilizing, according to a report issued Tuesday.

Prices for the S&P Case-Shiller Home Price index of 20 cities rose 1.6% from a month earlier, the third consecutive month of gains. They went up 1.4% in June.

And AP:

Index shows home prices rose for 3rd month in July

(AP) – 9 hours ago

NEW YORK — Home prices rose for the third month in a row in July, new data Tuesday showed, more proof a fragile housing recover is underway. . . . “We expected another gain but this is remarkable,” wrote Ian Shepherdson, chief U.S. Economist for High-Frequency Economics. He noted the index has risen at an 8 percent annualized rate in the three months to July, the best performance since early 2006 and the first increase on this basis since mid-2006.

The only thing that’s “remarkable” about any of this is the indefatigable army of real estate shills still drawing paychecks and preaching the gospel of rising home prices. In a typical news industry move, most of these articles have nothing but feel good messages coded into their headlines and ledes, only mentioning in an offhand way the fact that, well, home prices are still down 13.3% from 2008, and 33% since the peak of the housing bubble in 2006.

This gain of 1.2% ain’t much when you consider that 1) the Case/Schiller Index is NOT seasonally adjusted, 2) the increase in demand caused by all the government incentives doled out to new homeowners over the summer, 3) the huge shadow foreclosure inventory that is still restricting supply, and 4) the massive influx of government-backed subprime FHA loans, which made risky loans almost as easy to get as in 2006.

I’ve been writing about this months now. In fact, I covered this exact same Case/Schiller story a month ago, when newspapers exploded in wild-eyed boosterism because of a 1.4% month-over-month increase. And it probably needs repeating, so here’s a slightly abridged version in case you missed it:


By Yasha Levine


If you search your favorite news aggregate for “US housing market”,  you’ll find a whole mess of headlines guaranteed to make you feel good about that crappy McTractHome you might have bought at the height of the real estate orgy. Turns out that you’ll start making money on your investment sometime very soon.

If there’s one thing I’ve learned during the six months I’ve spent living in the subprime wreckage of Victorville, California, is that most of the news you read about the real estate market is a lie. Positive statistics are routinely taken out of context and misattributed, headlines are exaggerated, and negative trends are totally ignored or dressed up and buried deep down in the text. (There’s another interesting strategy I’ve seen used to exaggerate positive real estate market news: newspapers routinely separate good news from the bad. They are put in separate articles, with negative pieces using technical/business language, while the feel-good fluff is written simply enough for the average sucker to understand.) The newspaper industry’s shameless shilling for the real estate industry knows no political bias. Who knows, maybe it has something to do with all the money that changes hands between them. Like in 2006, when real estate ads stuffed newspaper coffers with $5 billion.

Unfortunately, I didn’t get a single cent worth of that. So let me tell you what really happened to the housing market this June:

Everyone is pointing to the S&P/Case-Shiller Home Price Index as a sign of recovery. The Case-Shiller index tracks the resale values of single-family homes in 20 cities, watching how they compare over time. The index has a two-month lag. So in late August, they released the stats for June. And what those numbers showed—well, I’ll let the numbers speak for themselves.

The reason everyone is so fucking ecstatic is because—now prepare yourself—instead of dropping an expected 16.4% from last year, home prices only fell by only 15.44%. Whoopee! Roll out the marching band and let’s plan a parade! But for some reason, almost no one bothers to mention this piece of mind-bending good news. Instead, they look at the “month over month” changes. And compared to home prices in May, the index for June actually went up 1.4%. One point four percent! That’s right, this is the tiny increase everyone is so giddy about.

But don’t go sinking your kid’s college savings into K&B Home stocks just yet, because, if you haven’t figured it out yet, the good news is not really good news at all. Looking at “month over month” changes to predict future real estate values is like trying to calculate the slope of a mountain with an electron microscope. At that kind of magnification, you can find convincing proof that the northern wall of the Great Canyon is as flat and smooth as the Great Plains.

Zoom out and it becomes pretty clear that the index’s trend line doesn’t leave much to be optimistic about.

Case Shiller Index June 2009

See that little knob at end of that graph? That’s what passes for “pronounced” and “wide-ranging” in financial reporting circles these day. The fact is, the Case-Schiller Index is down 15.4% over the last year and 31.3% from the high in 2006.

The positive gains don’t look like much, especially when you find out that this minuscule hick-up was a direct result of shady manipulations of and government intervention in the real estate market. (Hell, the Case-Schiller Index isn’t even seasonally adjusted. Recession and market inflation aside, there is almost always an increase in home sales during summer months.)

Financial reporters sure do have short memories. It seems everyone has forgotten that 2009 will go down in history as the Summer of Real Estate Reinflation, which was fueled by legalized accounting fraud and a whole lot of taxpayer money.

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Add your own

  • 1. DarthFurious  |  September 30th, 2009 at 5:45 am

    Real estate in this country has been a scam since the Louisiana purchase.

  • 2. jimmy james  |  September 30th, 2009 at 4:01 pm

    Why the shit would you want a seasonally adjusted house price index?

  • 3. sluggish  |  September 30th, 2009 at 9:31 pm

    amen to this.

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