Another month, another record decline in home prices, according to the Case-Shiller index.
But today's 15.3 percent year-over-year drop in April prices is accompanied by a gutsy call by Credit Suisse, which upgraded the home-building sector. From CS via Clusterstock (bold is mine):
Tough conditions to continue, but an inflection point in housing is likely in spring 2009 as inventory levels will likely start to decline. A peak in inventory of homes for sale is likely in spring 2009: Our supply-demand analysis suggests that we will begin to see declining inventory levels after spring 2009, which will be an initial step toward price stabilization, with prices being the key driver of margins and earnings.
Centex, Ryland Group, Pulte Homes, Toll Brothers, D.R. Horton, and KB Home were all started with outperform ratings by Credit Suisse.
Whether Credit Suisse's call is early will depend on whether that stabilization shows up through the second half of the year. There are still a record number of unsold homes on the market, and working through that glut over the next six to eight months will be tough. Economists at Global Insight are predicting more pain to come:
During 1990-2000, the Case-Shiller 10-City Composite Index was flat, after adjusting for inflation. During 2000-06, its real value rose 78%. The index has dropped about 24% in real terms since peaking. But given the current level of unsold homes on the market, the number of foreclosures already in or about to enter the pipeline, and the run-up in prices over 2000-06, this index is likely to drop much more.