Tuesday, December 30, 2008

"However, after the bubble, which peaked in 2005-06, expect a severe over-correction to the downside."

From EconomPic Data, another look as the Home Prices data:

"Case-Shiller Price Index (October)

For more information on what the Case Shiller Price Index is and why it may be an important measure, check out this old post.

The Case-Shiller Price Index (an adjustment to CPI) turned severly negative year over year, down 1.4% from last October as home prices, a global slowdown, and the reversal in energy prices severely impacted price levels.



Looking at the five year change in the Case-Shiller Index (the housing index, not the self created price index), we see home prices reverting back to a more "normal" 2% annualized level. However, after the bubble, which peaked in 2005-06, expect a severe over-correction to the downside.


Source: BLS / S&P"

The overshoot might explain why the Mayer/Hubbard figures for a bottom to the decline in housing prices might not work.

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