The S&P/Case-Shiller Home Price Indices came out for February 2008. They showed a year-over-year decline for most cities. The announcement from Standard & Poor’s came with the following chart:
The two charts are actually based on the same underlying data for the same time period. This is another case of when charts lie.
The first chart from S&P plots the year-over-year growth *rate*, not the price index itself. I created the second chart from the 10-city composite data from S&P. It plots the 10-city composite price index.
Before home prices reached a top in June 2006, the year-over-year growth rate slowed, but the prices were still growing. They were just growing more slowly than before. Lately the prices also dropped. That’s for sure. However the growth rate nose-dived much more than the price index itself.
If you look at the first chart, you would think the housing market is so bleak. If you look at the second chart, things are not so bad after all. Even with the price drop, the price index is still higher than it was before late 2004. In 20 months since June 2006, it merely gave up the gains of the previous 19 months. The index remains substantially higher than the trendline (red) established before the growth took off in 2000.
You can make charts tell whatever story you want. It depends on your perspective. Extending the decline in the second chart back to the trendline will be interesting.