The Case-Shiller Composite 20 house price index dropped at an annual rate of 18.5% seasonally adjusted (by me) in April compared with March. This was a relatively sharp slowdown in the rate of descent as the March month-to-month annualized decline was 24.2%. On a year-over-year basis, this house price index descended at its fastest rate to date, 15.3% vs. 14.3% in March (see Chart). If, in fact, the slowdown in the rate of price decreases on a month-to-month basis is signal, not noise, then perhaps we are nearing an inflection point in house prices.

That is, the trend in house prices will still be down for months to come, but the rate at which these prices are declining might be moderating. This would be "less bad" news for households and for holders of home-mortgage-related debt. But before these mortgage holders pop the champagne corks, keep in mind that the Case-Shiller home price index screens out foreclosure auction sales (hat tip on this point to Eugene Xu of Deutsche Bank Securities via Michael Nicoletti, an independent housing market analyst). Also keep in mind, as can be seen in below, that the month-to-month changes in the price index are "noisy."

By Paul L. Kasriel
The Northern Trust Company
Economic Research Department - Daily Global Commentary

Copyright © 2007 Paul Kasriel
Paul joined the economic research unit of The Northern Trust Company in 1986 as Vice President and Economist, being named Senior Vice President and Director of Economic Research in 2000. His economic and interest rate forecasts are used both internally and by clients. The accuracy of the Economic Research Department's forecasts has consistently been highly-ranked in the Blue Chip survey of about 50 forecasters over the years. To that point, Paul received the prestigious 2006 Lawrence R. Klein Award for having the most accurate economic forecast among the Blue Chip survey participants for the years 2002 through 2005.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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