The chart illustrates annual growth in quarterly GDP and private consumer spending (the C out of Y = C + I + G + NX) spanning the years 1947:2 to 2009:1 (forecast). The forecast in 2008:4 and 2009:1 is based on Wachovia's published forecast and consistent (if not slightly more benign than) with consensus expectations of the BEA's GDP release on Friday. Consumption is expected to reach -2.0% annual growth by 2009:1 (-1.5% in 2008:4), it's biggest decline since 1951:3.
Consumers have been shocked with high gas prices before and survived; annual consumption growth hit a low of -1.0% in the early 1980's. However, the quick evaporation of housing equity in the last year took households by surprise.
According to the S&P Case-Shiller composite-20 monthly house price index, national home values fell 16.4% in 2008 alone through November (just eleven months). That is 6.4% more than the decline from the housing price peak in July 2006 through the end of 2007 (10.4%).
The chart illustrates the regional loss in home values over the same two periods: eleven months of 2008 through November, and from the peak in activity through December 2007. Across most regions, home values fell sharply in 2008 (only through November) relative to the previous period declines.
- Phoenix saw the biggest declines in 2008, -30%, and a relatively mild decline through 2007, -17%.
- Las Vegas, Miami, San Francisco, San Diego, and Los Angeles saw a similarly devastating slash in home values in the eleven months of 2008.
- Portland saw a sharp decline in the eleven months of 2008, -11%, compared to the previous 16 months, -2%.
- Dallas, Denver, Cleveland, and Boston are the only cities to see smaller declines in 2008 relative to the previous period.