David Rosenberg says in his market letter today that his use of the phrase green shoot in yesterday’s lettermay have been the wrong choice of words. He had rejoiced over the month-to-month increase in the Case-Shiller home price index but it wasnt seasonally adjusted and that is really the only way to look at the data sequentially. On that basis the month-to-month change was -0.2%
Still, it was an improvement in the second derivative. The only problem, says Rosenberg, is that it may have been helped a lot by a measurement error i.e.shift in foreclosure sales toward high-end homes. Moreover, the banks are sitting on a record number of foreclosed units that have yet to hit the market (dont forget that the government-imposed moratorium just terminated). And once these homes flood the market, we may well get another big leg down in the price data, writes the noted bear from his lair at Gluskin Sheff + Associates Inc.
Other points from Rosenberg:
there are more than 800,000 to 900,000 vacant residential housing in the U.S., not a backdrop for anything but lower home prices
residential real estate still comprises over 30% of the household balance sheet, which remains high
the rental vacancy rate is now at a new all-time high so rental accommodation remainscompetitive with owned accommodation
the U.S. homeownership rate has another three percentage points to fall before the cycle runs its course
University of Michigan and Conference Board surveys indicate that home buying intentions are rolling over again
when bubbles get expunged, the mean-reversion process means that you fall below the mean; to erase the insanity of the 2001-2006 housing mania would suggest that home prices could indeed go down another 25% from where they are.