After months of being informed by many economists and pundits that risks of the much-feared "double dip" recession were nil, S&P's David Blitzer now states otherwise.
"There is no good news in October's report," said David Blitzer, chairman of the committee that released the Standard & Poor's/Case-Shiller home-price index. Citing expired tax credits for homebuyers and a lackluster national economy among the causes, Blitzer said "on a year-over-year basis, sales are down more than 25 percent and the month's supply of unsold homes is about 50 percent above where it was during the same months of last year."
The Case-Shiller index plunged unexpectedly, posting some price declines. Spinning this trend out, property values are set to slide, with more foreclosures to add to the backlog currently residing on the balance sheets of major commercial banks.
Slice it any way you wish, housing price declines mean less household net asset value and potentially lower spending levels.
Thus, the feared recessionary impact of the recent Case-Shiller data.
It adds more complexity to the already murky economic picture for early 2011.
On one hand, you have robust S&P500 earnings and balance sheets heavy with spendable, investible liquid assets, coupled with newly-legislated, extended tax rates.
Then, again, you have high unemployment, a continued bloated federal deficit, and state and municipal financial woes.
With that uncertain backdrop of conflicting influences, this week's Case-Shiller Index news landed with a worrying thud. It's hard to believe it bodes well for the US economy in the months ahead.
So much for all the Pollyanna pundits of 2010 assuring us that residential real estate woes were in the rear view mirror.
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