Desert Home Prices Falling Fast

Case-Shiller is out with their home price index again today and I thought I'd take a look at the desert cities of Phoenix and Las Vegas.

Prices generally fell faster in July than in previous months with only 6 of the 20 cities reporting home price gains. New home sales data indicates that the higher-priced homes were harder hit. Jumbo mortgages are proving to be hard to get at reasonable rates. Going from a $400,000 mortgage to a $425,000 jumbo mortgage will push your payment up by $500 per month for a 30-year fixed rate. That's hit home prices in the more expensive coastal areas, but the desert has a different set of problems.

Arizona and Nevada saw tremendous population growth in recent years. That helped fuel a housing boom. But the torrent of people headed to the desert, has dried up in recent months. Phoenix area schools show no increase in enrollment this year compared with last. Tucson school enrollment is down by 2%. So is enrollment in Flagstaff schools. Phoenix, in particular, has thousands of foreclosed and vacant homes. The following graph shows the historical price pattern and my expectation through August of 2009.

Bear Market Statistics

This graph shows the DJIA and the S&P500 are currently at bear market levels less then 2% above their July 2008 lows. Us asset allocators have our fingers crossed that the S&P500 does not make a fifth lower low in a ongoing bear market.


The NASDAQ is showing relative strength at 4% above its bear market low set in March 2008. The worry with the NASDAQ is it broke the potentially bullish trend of higher lows by making low Friday that was lower then its July and August lows.

It was refreshing to hear bond guru, Bill Gross of PIMCO, tell his readers and people on CNBC last week that he was too early buying troubled bonds which has resulted in losses.

From Bill Gross's September 2008 Investment Outlook

Too bad for us and for everyone else who bought too soon. There are few of these deals now priced at par or above, which is bondspeak for “they are all underwater.”

Bear Market Statistics:

S&P500 Chart

Last Market High 10/11/07 at 1,576.09
Last Market low 07/11/08 at 1,200.44
Current S&P500 Price 1,242.31
Decline in Points = 333.78
Decline in percent = 21.2%
Max Decline = 23.8%

=>This means the decline from intraday high to intraday low is 23.8% and we are currently 21.2% off the peak.

=>The decline in the S&P500 from the closing high to the closing low was 22.4%

DJIA Charts

Last Market High 10/11/07 at 14,279.96
Last Market Low 07/15/08 at 10,827.71
Current DJIA Price 11,220.96
Decline in Points = 3,059.00
Decline in percent = 21.4%
Max Decline = 24.2%

=>This means the decline from high to low has been 24.2% and we are currently 21.4% off the peak.

=>The decline in the DOW off the closing high to the closing low was 22.6%

NASDAQ Charts

Last Market High 10/31/07 at 2,861.51
Last Market Low 03/17/08 at 2,155.42
Current NASDAQ Price 2,255.88
Decline in Points = 605.63
Decline in percent = 21.2%
Max Decline = 24.7%

=>This means the decline from intraday high to intraday low is 24.7% and we are currently 0.211646998 21.2% off the peak.

=>The decline in the NASDAQ off the closing high to the closing low was 24.1%

CAL (2-0) won 66 to 3, GO BEARS!

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