Case-Shiller Home Price Index Rises for Second Straight Month, First Time In Almost 3 Years
NEW YORK (Reuters) - Prices of U.S. single-family homes rose for the second consecutive month in June, exceeding expectations and adding to evidence that the three-year housing slump is easing, Standard & Poor's reported on Tuesday.The S&P/Case-Shiller composite indexes of 10 and 20 metropolitan areas both rose 1.4 percent in June from May, almost three times the 0.5 percent increases of the month before. May's increases were the first in nearly three years (see chart above, data here).
Optimism over a housing recovery blossomed last week after reports showed rising confidence among homebuilder and sales of existing homes rose in July for the fourth consecutive month. Economists expect the sector's recovery could help the nation emerge from recession and further stabilize financial markets that have suffered their worst crisis since the 1930s.
MP: The increases in May and June for the Composite-20 Index marks the first time in almost three years of back-to-back monthly increases, and the June increase was the largest monthly increase since October 2005 (see chart above, data here).
9 Comments:
CS is a crap index - very narrow and biased
Mark,
The data show a clear cyclical nature in home prices. June is the best month in the annual cycle. Based on the past nature of the trends, I expect home prices in December to be lower than they are today.
Two-thirds of home sales are either foreclosures or banks taking a loss on the mortgage." And only a third of the remaining one-third -- roughly 10% of overall sales -- comes from "something we could call a normal selling process.
- John Mauldin of Millennium Wave Advisors, 8/20/09
Property Values: 10 Key Charts
Home buyers are being pushed aside by cash rich speculators as banks unload inventory.
"Cash is king" in market for forclosed homes
And in half the cities they are down. The improvements are only in places which already had a shave, haircut, and body wax treatment.
According to FHFA, all but four states are showing year over year declines and most are getting worse from the first quarter. Oregon, Washington, Utah, Hawaii, and Idaho have joined the biggest loser club. Alaska house prices just went negative. Michigan, despite an upturn, still has 9 years of houses under water.
Third quarter will look good too due to peak home buying, speculation, and incentives. But since that season is over, it's downhill for the rest of the year. Foreclosures hit new record highs in the nation and 43 states.
The index figures are around the level of mid 2003 (well Detroit is in 1995). So it's a reset to levels 6 years ago. At some point there had to be an increase.
What's on many homeowner's minds is when does it get back to where it was?
OA, yes home owners want it back to where it was because it made them feel house rich. But since asset prices were inflated, it's not reasonable to expect that any time soon. The same can be said of employment and house building.
All these things will rise naturally with population. The question is how long before we return to a steady state growth rate. We will reach that, thankfully, sooner than the previous peak but well after people will hope it to be. Disappointment is in our future.
With the collapse of structured finance, rising unemployment and foreclosures, house prices could stay stagnant for many years which will make houses an awful store of value. No one can predict the future with reliable accuracy, but this seems like an incredibly risky time to buy a house unless you plan on living in it for 30 years. Few people buying now have that objective. They are either speculators or people buying 'starter' homes.
As Calculated Risk Blog points out, if you bought a house in mid-1991 expecting the bottom to be over, you were badly disappointed as house prices floundered for 5 years. Think about the lost returns of all those additional payments over rent, taxes, insurance, and down payment.
Anonymous, that's what I was getting at. A turn upward doesn't mean things are great, just that they're maybe getting better. It's a long way to go for some folks to be whole.
I was hoping that the economy was finally getting better.
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