Published August 25, 2009
Some normative statements from the WSJ:
–Not only are housing prices stabilizing, they are starting to grow. The three most widely used yardsticks for measuring housing prices (The National Association of Realtor’s median price, the Federal Housing Finance Agency (FHFA) price indexes and the Case-Shiller prices indexes) are telling a similar story…First, it will help banks holding toxic assets: With house prices stabilizing, these assets will regain some of their lost value. Second, the market for selling homes will get a short-term shot in the arm from the so-called “fence-sitters” who have been waiting for prices to fall even more before buying a home. Third, rising prices will help consumer spending through the wealth effect. –Patrick Newport, economist at IHS Global Insight
–The breadth of gains across cities was impressive, with eighteen out of twenty cities recording increases, some of them very strong. Cleveland rose 4.2% after rising 4.1% last month, so its yearly rate is now down only 3%. …Some have argued that the recent improvement is simply a seasonal effect. That is playing some role, but seasonally adjusted, prices were flat in May and up 0.8% in June, suggesting that some underlying improvement is occurring…. Overall, this appears like a genuine turn. –Ian Morris, HSBC’s head of U.S. economics
– Will the bottom hold?The main concern here is that various foreclosure moratoria temporarily limited the downward pressure from distressed properties and as foreclosures pick up again, prices will head lower. This is certainly possible, but it feels like the firming in demand for homes will be sufficient to counteract the downward influence from the ongoing foreclosure wave…While it would be nice (not least as a homeowner myself) to think that home prices are going to quickly recover a chunk of the ground lost over the past 2 or 3 years, we are simply not that optimistic. –Stephen Stanley, RBS Securities
Mark Perry proves “why” the latest real estate numbers are positive:
MP: That’s one way to look at it. Here are some alternative views:
1. The April to May increases in median home prices (3.84%) and mean home prices (3.26%) were the largest monthly price increases in more than a year (data here).
2. The monthly May increase in both median home prices (3.84%) and homes sold (2.36%) was only the second time in at least a year that both prices and unit sales increased in the same month.
3. The back-to-back increase in home sales in both April and May is the first time in at least a year of two consecutive monthly increases.
4. The most recent two-month increase in sales of 4.84% is the largest since April 2004 (source).
5. The 9.6 months supply of inventory in May is below last year’s May level of 10.9 months by more than five weeks, and is at the second-lowest level in the last year.
Carpe Diem has some great news for the California real estate market. It seems that California’s real estate has stabilized and is showing signs of life.
The March 2009 median price rose 2.2% compared with February’s $247,590 median price. “The statewide median price showed the first monthly increase since August 2007, and has remained in the $250,000 range over the past three months,” said C.A.R.’s Chief Economist Leslie Appleton-Young. “A number of regions around the state also have registered monthly gains for one or more months since the beginning of this year. While these are welcome signs, it remains to be seen whether home prices have stabilized.
A chart from Carpe Diem:
The 30-year fixed mortgage rates are the lowest ever recorded. It’s a great time to refinance or buy a home.
Professor Perry at Carpe Diem hits a home-run:
Bottom Line (from Prof Perry): The way the media reports it, you would think we were years away from a solid recovery in the real estate market, especially in states like California, when some of the housing data suggest otherwise. The 40.5% fall in California home prices is helping to stimulate home sales there, as the Law of Demand would predict.
Overall sales volume has increased in California by 20.5%, from $1.32 billion a year ago to $1.58 billion in January this year, the Inventory Index has decreased by almost 10 months, and the median number of days to sell a home decreased by almost 21 days. In other words, market forces are working in the California real estate market.
Mark Perry has a nice picture which breaks down foreclosure percentages by state. As you can see, only California, Nevada, Florida, and Arizona have significant problems. Goes to show you that the problem is only in four states and how the media can overplay the problem
Carpe Diem has found some great news regarding housing:
Hopefully, the increase in housing affordability and new record-high will play an important role in the real estate market’s recovery. Interestingly, the record-high level of housing affordability has not yet been reported, or at least I couldn’t find a single news report on this topic.