Attention Housing Optimists

Today’s S&P / Case Shiller update is all you need to know about present and near term prospects for the housing market.

March 31 (Bloomberg) -- Home prices in 20 U.S. cities fell 19 percent in January from a year earlier, the fastest drop on record, as demand plummeted and foreclosures rose.

Home price declines continue to accelerate. House values are falling at the fastest pace in U.S. history. Inventories are extraordinarily high. Foreclosure volumes are at record highs and increasing.

Despite month-to-month volatility in the market data and the inevitability that house transaction volumes will eventually increase, there is no possibility that housing prices will stabilize in the near future. Buying a house in this environment is a conscious decision to lose money.

Ignore the media’s coverage of house transaction volumes unless they materially reduce inventories of for-sale properties. Understand that foreclosures continue to expand as a percentage of sale volumes. This is not a positive development for housing prices.

My advice is to ignore any source of housing market analysis that does not incorporate an integrated understanding of these trends in their prognostications.