Thou shalt not lie: NAR edition

I've heard the meme that "house prices are falling for the first time since the Great Depression" quite a few times recently (examples here and here). The source cited is the National Association of Realtors (the phrase appears in many of their documents).

I'm not sure how these folks came up with it, but its clearly nonsense. We only have to go back to.....1991 to find widespread falling real estate prices. The Case-Shiller indices, probably the most realiable data around, show that nationally prices fell 6.8% between the peak in October 1989 and the trough in February 1994.

Ironically, the NAR has been parroting this line for quite a while now, obviously expecting people to believe that home values hardly ever drop and only do so in the most extreme circumstances. Well, the lie has come back to bite them in the ass. Nowadays, it's more likely to inspire (unwarranted) panic than confidence.

Winners and losers

Which stock market sector has had the worst performance so far in August? If you answered financials, you (and I) were wrong. Taking the S&P Global 1200 as reference, it turns out that materials, energy, industrials and consumer discretionary all performed worse than financials.



This is not as strange as it may seem. Look at year-to-date results (YTD). Financials are the worst performing sector, as expected. This means that the damage inflicted by this crisis had been reflected in valuations before the lates news. Which is fairly good news. The bad news is that the sectors who fell most this month are cyclicals, which means that worries about global growth are rising.

Geographically, so far this month emerging markets have donde worse than developed markets and the US has done better than Europe. This has identical meaning to the sector breakdown above. The bad news is already in US stock prices (well, as long as more unanticipated bad comes along) and worries about growth are spreading to the stronger economies (Europe, emerging markets).