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Tuesday, June 24, 2008

Case-Shiller April

I previously detailed that CPI may overstate inflation for an individual who:

  • does not own a home
  • would like to own a home
  • will likely soon buy a home
as it does not include how "affordable" housing has become with the recent price collapse for non-homeowners (full details here).

As can be seen below, the Case-Shiller Price Index flipped negative year over year for the first time in April as today's Case-Shiller release shows further deterioration, with the Composite 10 dropping over 16% year over year.

In looking at the Composite 10's five year rolling returns (annualized), even after the huge downturn in prices, returns over the most recent five year period are still positive at ~5% / year. A 5% return over this period is still pretty significant considering current housing fundamentals and tells me there is still room for further deterioration.