Tuesday, June 30, 2009

Home Prices are "Less Worse"

Bloomberg reports:

Home prices in 20 major U.S. metropolitan areas fell in April at a slower pace than forecast, a sign the plunge in real-estate values is abating.

The S&P/Case-Shiller home-price index decreased 18.1 percent from a year earlier following an 18.7 percent drop in March. The measure declined 19 percent in January, the most since the data began in 2001.

Price declines are likely to keep moderating as demand steadies and distressed properties account for a smaller share of transactions. Still, the highest jobless rate in 25 years is contributing to record foreclosures, which are likely to keep depressing values for months to come even as home sales steady.

Below is a chart of the second derivative in year over year change (i.e. April year over year change less March year over year change).

It looks like some of the worst hit markets are beginning to bottom (California and Florida to be more specific).

Source: S&P


  1. Jake -

    I know you didn't coin the term 'second derivative' but doesn't that term just make the change in change seem a bit more scientific that it actually is?

    These calculations are just what is happening to the change month to month. Given seasonal factors and the fact that econometrics don't actually follow linear, quadratic or sinusoidal equations positive 'second derivatives' can easily turn negative the next month.

    This term is so typical of economics and recent finance industry. Use a highly technical term for something that is not complicated and is not indicative of a meaningful trend...

  2. the term or the analysis?

    i agree that one data point doesn't make a trend, but looking at the speed of decay does allow one to see if things are getting worse.

    with regards to the term, i agree that there aren't many that are more annoying. green shoots is definitely one of them though.