Have Home Prices Finally Bottomed Out? 3/31/10
The latest S&P/Case-Shiller Home Price Indices are out and they suggest that home prices may be — can we say this? — firming.
There are two indexes, one tracks 10 cites and the other tracks 20 cities. S&P/Case Shiller says “the 10-City Composite is unchanged versus where it was a year ago, and the 20-City Composite is down only 0.7% versus January 2009. Annual rates for the two Composites have not been this close to a positive print since January 2007, three years ago.”
Translation: there’s some stability in the marketplace. it’s not evidence of a land rush, but it ain’t bad.
“The report is mixed, “says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “While we continue to see improvements in the year-over-year data for all 20 cities, the rebound in housing prices seen last fall is fading. Fewer cities experienced month-to-month gains in January than in December 2009, on both a seasonally adjusted and unadjusted basis. Moreover, in four cities — Charlotte, NC, Las Vegas, Seattle and Tampa — prices reached new lows following the financial crisis. Tampa and Las Vegas experienced some of the largest gains and declines in this cycle, while Charlotte and Seattle saw much more modest price booms and relatively late peaks. On a brighter note, San Francisco and Minneapolis are 15.2% and 12.9% above their trough values.”
Compared to the mess seen during the past three years the latest report is a lot better than what we’ve been seeing. That said:
- Month-to-month changes which will be cited by some news media are largely worthless. The reason is that weather, holidays and the number of days in the month can impact results. Year-to-year comparisons are much better.
- A huge flood of option ARMs will re-cast in 2010 and 2011. Many of these loans — if not most — will lead to foreclosure, especially if interest rates rise.
- Unemployment remains a substantial problem.
- The first-time homebuyer credit is scheduled to end April 30st. If it is not extended then real estate demand will fall. Don’t be surprised if the program is extended.
- The six states which according to RealtyTrac represent more than 60 percent of all foreclosures nationwide — California, Florida, Michigan, Illinois, Arizona and Texas — will take longer to clean up than other states simply because they have larger inventories of foreclosed homes to absorb.
And so, no, despite some good news we’re unlikely to be at the start of a new rise in home prices. Progress has been made, especially with new federal mortgage modification programs to keep homes out of foreclosure and within local markets, but much, much more remains to be done.
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