May 30, 2012
From the WSJ:
Tuesday’s S&P/Case-Shiller home-price indexes show a market in which U.S. home prices are still falling, but not as dramatically as in previous months. This is good news for homeowners and home sellers since it indicates that the market is bottoming out. It’s also a sign that the housing downturn, now in its fifth year, may be approaching the end.
Nationally, the average sale price of a single-family home fell 1.9% from a year ago, which economists are calling effectively flat. Some markets, including Phoenix, showed major growth in prices, while five of them — Atlanta, Chicago, Las Vegas, New York and Portland — fell to new post-financial crisis lows.
Analysts took the news that the Case-Shiller indices, which trail the market by three months, are finally coming around to the fact that the market, generally speaking, is at or near bottom. They remain divided, however, on whether we are likely to see continued improvement in the short term. Here’s what some of them have to say:
Stuart Hoffman, chief economist, PNC Financial Services Group: “The housing market is turning around. The big decline in house prices is now over, although prices could see small drops in the near term as more foreclosures hit the market following the agreement earlier this year between the big mortgage servicers, state attorneys general and the Obama administration. Better fundamentals are supporting the improving housing market. Affordability is very high given the price drops and extremely low mortgage rates. Although credit is still tight, it is loosening somewhat. Demand is strengthening with the better labor market and improving consumer confidence.”
Patrick Newport and Michelle Valverde, U.S. economists, IHS Global Insight: “Are home prices still looking for a bottom, as the Case-Shiller 10 and 20-city composite indices imply, or are they stabilizing, as the Federal Housing Finance Agency numbers indicate? It depends in where you are. Housing prices are still mainly driven by local forces such as job growth and the neighborhood foreclosure rate. Still, in most cities, home prices appear to be stabilizing…Our view is that foreclosures, excess supply, and weak demand will drive home prices as measured by the Case-Shiller indices down a bit further, but that a bottom is in sight.”
Tom Lawler, independent housing analyst: “As I’ve done before, in discussing the seasonally adjusted data I put ‘seasonally’ in quotes, as there have substantial changes in the purported ‘seasonal’ pattern of home prices since the housing market cratered. The reason, of course, is that there is a marked ‘seasonal’ in the distressed-sales share of home sales, which peaks in the late winter months and hits a trough in the summer months. Not coincidentally, the ‘shift’ in the ‘seasonal’ pattern of home prices has been one where home prices are ‘seasonally’ much weaker than they used to be in late winter, and ‘seasonally’ much stronger than they used to be in the summer.” Taking this into account, Mr. Lawler writes that there is a “better-than-even chance” that the Case-Shiller numbers will show an increase next quarter.
The feared double-dip in housing markets continues to grow deeper, with the Case-Shiller indexes hitting new post-crisis lows, reversing back to levels not seen since mid-2002. The rate of decline appears to be slowing, though, leading to some “cautious optimism” by economists that believe prices have found, or are close to finding, a floor. Analysts at Nomura expect home prices to turn positive by the end of the year, despite the recovery’s loss of momentum and possible spill-over effects from Europe.
All three of S&P/Case-Shiller’s main composites fell to new post-crisis lows in the first quarter, a report released on Tuesday showed. The national composite slid 2% during the first three months of 2012, and is down 1.9% year-over-year. The narrower 10-city composite is now down 2.8% annually, while the 20-city recorded similar declines, down 2.6% from a year ago.
Both composites are about 35% off their 2006 peaks, while five cities (Atlanta, Chicago, Las Vegas, New York, and Portland) made fresh index lows in March. The tide could be beginning to turn, though, as the rate of decline has eased compared with the nine cities that hit fresh lows a month earlier. Only three cities, Atlanta, Chicago, and Detroit, recorded annual declines.
On the flip side, seven cities (Charlotte, Dallas, Denver, Detroit, Miami, Minneapolis, and Phoenix) recorded prices above year-ago levels.