the visible hand

it is the theory which decides what can be observed – einstein

Home Prices: Steepest Drop in 20 Years

Posted by ecoshift on August 28, 2007

Home Prices: Steepest Drop in 20 Years: S&P Says Housing Prices Fell in 2Q by Steepest Rate Since Its Index Was Started in 1987
Financial News – Yahoo! Finance
Tuesday August 28, 9:58 am ET
By Vinnee Tong, AP Business Writer

NEW YORK (AP) — U.S. home prices fell 3.2 percent in the second quarter, the steepest rate of decline since Standard & Poor’s began its nationwide housing index in 1987, the research group said Tuesday.

The decline in home prices around the nation shows no evidence of a market recovery anytime soon, one of the architects of the index said.

MacroMarkets LLC Chief Economist Robert Shiller said the declining residential real estate market “shows no signs of slowing down.”

The report came a day after the National Association of Realtors said sales of existing homes dropped for a fifth straight month in July while the number of unsold homes shot up to a record level.

The S&P/Case-Schiller quarterly index tracks price trends among existing single-family homes across the nation compared with a year earlier .

A separate index that covers 20 U.S. cities fell 3.5 percent in June from a year earlier. A 10-city index fell 4.1 percent from a year earlier.


8 Responses to “Home Prices: Steepest Drop in 20 Years”

  1. gulo gordo said

    so the pre-announcement expectation was 1-2%, but the report number was 3.2% Ouch! And then these other indexes — which presumably represent a concentrated share of the value of the market, being cities — are 3.5 and 4.1? Ayiyi!

    I don’t want to shout fire in a doghair thicket, but it’s getting hard to see how to get to even a soft landing from here. The housing-price storm clouds seem even more ominous in light of the the census data you’re highlighting above — even in ‘good’ times, things didn’t get better for most people in the US.

    Thanks for all this, and please to continue with the inquiries into the relationships between the housing markets, credit, and the timber industry. For example, in a classic cyclic response, pulp prices are up while lumber is diving through the basement. Is that good for sustainable foresty? And what impact are these trends having on PL’s bankruptcy?

    Inquiring minds, not to mention ravenous mustelids, want to know.

  2. ecoshift said


    Important questions, but I’m not sure there are any easy answers..

    What do you think the implication of high pulp prices are for forestry? for sustainability?

    Do you have any specific figures?

  3. gulo gordo said

    What do you think the implication of high pulp prices are for forestry? for sustainability?

    Well, see, that’s why I was asking you… it’s trying to figure out which side of the sword slices deeper that baffles me.

    High pulp prices, on the one hand, could easily encourage (not that they need it) the Canadians to knock down and grind up more of the third of BC and Alberta that they’re already on track to log ASAP (I exaggerate, but not by much).

    OTOH, high pulp prices here on the N Coast is actually allowing some smaller-diameter stuff to pay its way out of the woods, which has generally been one of the greatest barriers to actually doing the thin-from-below logging that most of us in the restoration biz agree needs to get done.

    Without such a demand for material that really doesn’t make good dimensional lumber, we generally wind up with projects (especially on public land) where big trees get thrown into the mix in order to make the project ‘pencil out.’

    And yet, on that theoretical third hand (bike shops have ’em, why shouldn’t envtl economists?) if demand for pulp or biomass gets high enough (or stays high enough over time, a particular danger with larger-scale biomass facilities), it is easy to see how that demand could outstrip the sustainable production level of its working circle of forest. [I assume generally that logging levels need to be a fraction of historic cuts, but also lower than most industrial foresters’ assumptions, in order to provide habitat security and recovery for various species.]

  4. ecoshift said

    The ability of pulp markets to offset losses on lower quality material has been a factor on the north coast in the past, notably when there was some competition between power facilities, cogen plants and the pulp mill for raw material. A recent publication from the US Forest Products Labs in Madison WI and Princeton WV may help shed some light on overall dynamics in the pulp industry: Globalization and structural change in the U.S. forest sector.

    It may be that the price of pulp, a globally set commodity price, will respond to declining dollar exchange rates more rapidly than the price of domestically produced sawlogs destined for a crashing national housing market. If this comes to pass it would appear to be a double edged sword: it may well allow “some smaller-diameter stuff to pay its way out of the woods”; it may also lower the rotation age of “economic” maturity in industrial stands — providing an additional incentive for short rotation forestry. We’ll have to see how high prices go.

  5. gulo gordo said

    Very interesting. The way I’ve had it explained, there is a traditional cyclic relationship between timber and pulp; eg, when timber prices and production are down (lowering the volume of by-product available for the pulp market), pulp tends to rise in price.

    What you’re suggesting here, if I understand it correctly, is that the global market in pulp may lead to decoupling of the domestic/ N American timber-pulp relationship?

    And thanks for the link. It’ll go right onto the stack — but on the top, I assure you.

  6. ecoshift said


    It’s true. It appears to me that the cyclic relationship you’ve identified makes sense in a closed system of supply and demand, but not necessarily in a globalized economy. Plantations grown specifically to supply pulp markets could have an impact, as well as heightened global demand.

    I believe much of the analysis we read is based on assumptions of a largely closed domestic economy and that the US market is the driver of the global economy. I think a few things have changed since the 60’s and 70’s. The size of the global economy relative the US market. The strength of the global GDP relative to US GDP. The shear volume of imported goods and services embedded in US consumption and production. And, significant increase in international capital flows in several directions through a variety of instruments including FDI, equities and debt.

    I claim no particular expertise here. Certainly, I’m no expert in the global market for pulp. Nor do I claim to be able to identify/predict how changing dynamics will play out. Just trying to pay attention, same as you.

    Here’s an update based on data drawn from the UNECE/FAO Forest Products Annual Market Review, 2006-2007:

    Strong sawnwood and pulp markets push roundwood prices to record highs in 2006-2007
    16/08/2007 – 04:06 PM

    Wood raw material costs for the manufacture of sawnwood have shot up in many regions around the world in 2006 and 2007, with the global average softwood sawlog price reaching an all-time record high of $82/m3 in 2007, as UNECE and FAO pointed out in their recent UNECE/FAO Forest Products Annual Market Review, 2006-2007.

    During 2007, the average global wood fibre prices reached their highest levels in 12 years as a result of strong pulp and paper markets and a number of events that impacted the wood fibre supply, including but not limited to increased competition for raw material from the energy sector, weak US sawnwood markets and unfavourable weather conditions.”

  7. […] Home Prices: Steepest Drop in 20 Years […]

  8. gulo gordo said

    Seems to me that UNECE report pretty much tears it. If global timber prices are rising in the face of the comprehensive collapse of US demand (see new housing market, collapse of speculative bubble in), then someone’s driving and it isn’t us.

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