Release Explanation: This is a report on monthly home prices of existing single family homes. The report is an index of prices rather than the prices themselves and covers 10 city and 20 city composites. Housing reports are especially important at this time, given the state of the economy and financial markets. Retail Sales, CPI, and PCE in the US.  A happy householder will usually lead to a strong economic outlook. A miss here, either way, and the Markets gets to see the real confidence of the US consumer.  There is a very strong impact on the sentiment towards the US Dollar from this report.


Trade Desk Thoughts: Prices for existing single-family homes in 20 metropolitan areas fell 18.5% in the year to December, according to the latest report from the S&P/Case-Schiller Home Price Index, a new record pace of decline.


The fall in the S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded an 18.2% decline in the 4th quarter of 2008 versus the 4th quarter of 2007, the largest in the series’ 21-year history. The 10-City composite also set a new record with a 19.2% annual decrease.


Most of the nation appears to remain on a downward path, with all of the 20 metro areas reporting annual declines, and eight of those MSA’s now with negative rates exceeding 20%. If one looks in detail at the annual return data, it can be seen that 13 of the 20 MSA’s and the two composites have been reporting consecutive record declines since December 2007. The monthly data follows a similar trend, with all of the metro areas reporting at least four consecutive months of negative returns.


The seven worst performing cities in terms of year-over-year declines continue to be from the Sunbelt, reporting negative returns in excess of 20%. Phoenix was down 34.0%, Las Vegas reported -33.0% and San Francisco fell 31.2%. Denver, Dallas, Cleveland and Boston faired the best in terms of annual declines down 4.0%, 4.3%, 6.1% and 7.0%, respectively.


Looking at the data from peak-thru-December 2008, Dallas is down a relatively mild 8.6% from its peak in June 2007, while Phoenix is down 45.5% from its peak in June of 2006. The rates of decline from the individual heights of each market are evidence of how much each market has taken back in terms of the gains earned in the past 10-15 years. Eighteen of the 20 metro areas are in double digit declines from their peaks, with half of the MSA’s posting declines of greater than 20% and four of those (Las Vegas, Miami, Phoenix and San Francisco) in excess of 40%.


Forex Technical Reaction: S&P futures were trading 2 points higher prior to the report while the dollar was lower against the higher-yielders and stronger against the yen on the day.S&P futures gained about 2.5 points after the report, probably because the whisper number on the street was far worse than what economists' had expected to see.