Chart of the Day: We’ve already had a “W”



Today’s widely-watched Case-Shiller data showed a powerful surge in national house prices of 1.4% in the month of June (the red bars in the chart below) and positive readings across 18 of the 20 cities in the data set. The raw data is not seasonally adjusted so the strength of the recovery might be overstated, but not the direction. The headline index is now available with seasonal adjustments and it was up by 0.7% in June, the first positive reading since early 2006 (the blue line). Coming on the heals of the strong existing home sales number last week, the upward turn in prices bodes well for the economy’s residential sector. And it also bodes well for many of the asset-backed securities whose values imploded during the downturn; having marked down those securities by a lot, many holders might soon begin marking them back up at least a little.

Meanwhile, having missed the turn, recovery skeptics now argue that the data is enjoying a temporary lift and that home prices will again fizzle as the “V” gives way to a “W.” As it happens, at least on home prices, the skeptics are completely right. Or, more correctly, they were. Exactly a year ago, house prices tentatively began to recover, with many cities posting monthly gains and the national index at least showing smaller declines. However, by late summer house prices again began to slip and then went back into a full-blown plunge after Lehman. Today’s data completes the “W.” Of course, there’s the chance that there will a triple bottom, or a “double-W.” Our own view is that the turn is powerful and it is for real.



The information presented in this presentation (the “Presentation”) has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell Interests or any other security or instrument or to participate in any trading strategy. No representation or warranty (express or implied) is made or can be given with respect to the accuracy or completeness of the information in this Presentation. No person has been authorized to make any representations concerning the Interests described in this Presentation that are inconsistent with the statements contained in this Presentation.