Case Shiller Tells Us What We Already Know

The November SP Case Shiller 20 city home price index fell to the lowest level since March 2010. It fell 1.6% YOY, which was within expectations. Home prices now have fallen for five straight months. 

The biggest declines were in Atlanta, Chicago, and Detroit.
The biggest gainers were in SF, LA, San Diego, and DC.

Las Vegas which is the benchmark for housing excess saw prices drop 3.4% YOY.

Yada...Yada...Yada...Net. Net, the headline index is now just 3.5% above the April 2009 lows. This is after all that has been done via trying to stabilize housing. We are talking about housing tax credits, HAMP, and the MBS/toxic sludge buying program that the Fed instituted in 2009. What do we have? This shows the absolute horrible condition of housing finance in this country.

BTW...Housing prices as a whole are down 30% from July 2006 highs.

What this means is just more of the same government policies going forward. The Fed will look at the state of housing and keep stepping up the liquidity.

The lack of governmental involvement in housing has caused continued declines throughout much of the country. This is because the consumer is tapped out and the private sector is dead.

The tax credits have stopped. HAMP was a tool for Treasury to temporally stop foreclosures not for homeowners to refinance. Most importantly, the Fed is not bidding for MBS. The MBS purchasing plan ended on 4/1/2010, and we have seen what housing prices have done since then.

I still see some 5-10% further housing declines across the country, suite simply because housing is overvalued and employment has not picked up. If the economy weakens then all bets are off.

This is why the Fed will keep QE2 in place. This is why liquidity will continue to flow. This is why ZIRP will be the official monetary policy going forward. The Fed knows what happened to housing when they tried to disengage, they can't afford to disengage from the broader economy.

Quite simply the private sector is dead. It can't support a 14T economy. It never could. There is no free market. That is a myth. The private sector needs to deleverage just as much as consmers do. There is currently $8T of debt on corporate balance sheets, roughly $2T of cash. WOOPTI DAM DO!

The government is the economy. Better get used to it.