Case-Shiller; Housing market not in any form of sustained recovery

Dennis Norman

Dennis Norman

This morning S&P/Case-Shiller Index report for May was released showing that the annual growth rates in 15 of the 20 Metro Area’s their reports cover improved in May compared to April 2010. The 10-city composite is up 5.4 percent from the year before and the 20-city composite is up 4.6 percent from the year before. Continue reading “Case-Shiller; Housing market not in any form of sustained recovery

Home Prices In Most Metro Areas Improved in April But Do Not Show Signs of a Sustained Recovery

Dennis Norman

Dennis Norman

This morning S&P/Case-Shiller Index report for April was released showing that theannual growth rates of all 20 Metro Area’s their reports cover improved in April compared to March 2010. The 10-city composite is up 4.6 percent from the year before and the 20-city composite is up 3.8 percent from the year before.

However, in spite of this little bit of encouragement, David Blitzer, Chairman of the Standard & Poor’s Index Committee casts a negative light on the market by pointing out the, while this report does show some price gains, “many of the gains are modest and somewhat concentrated in California….moreover, nine of the 20 cities reached new lows at some time since the beginning of this year…”.

Tax-Credit Boost to Market-

Blitzer also stressed the impact of the homebuyer tax credit deadline on the market by saying “the month-over-month figures were driven by the end of the Federal first-time home buyer tax credit program on April 30th…eighteen cities saw month-to-month gains in April compared to six in the previous month.”

A Recovery Does Not a Tax Credit Make-

The Case-Shiller report shows results for April that, if fueled by a “real” market, may be sustainable but since it has clearly been fueled temporarily by the tax credits, it is not necessarily an indication that home prices have fully stabilized or that a housing recovery is underway. In the report Blitzer confirms this saying “other housing data confirm the large impact, and likely near-future pullback, of the federal program….recently released data for May 2010 show sharp declines in existing and new home sales and housing starts….inventory data and foreclosure activity have not shown any signs of improvement.”

When Will Home Prices and The Housing Market Stabilize? Where’s the Recovery?

Blitzer expects that it will be next year before we see “consistent and sustained boosts to economic growth from housing”. For what it’s worth, I agree…I don’t see much happening this year other than, hopefully, some markets finding their bottom and then beginning to stabilize.

case-shiller-april-2010

 

US Home Prices Fall In First Quarter; St Louis Home Prices Rise

Dennis Norman

Dennis Norman

Today the S&P/Case-Shiller Index report for the first quarter of 2010 was released showing that the U.S. National Home Price Index fell 3.2 percent in the first quarter of 2010, but remains above it’s level from a year-earlier.

In March, 13 of the 20 MSA’s covered by the Case-Shiller report, as well as both the 10-city and 20-city composites, were down for the month however both the composites as well as 10 of the 20 MSA’s showed year-over-year gains. The report cites the end of the tax incentives and the increasing foreclosure rate as reasons the housing market is seeing some “renewed weakness“.

case-shiller-march-2010

Other highlights from the report –

  • The S&P/Case-Shiller U.S. National Home Price Index for first quarter 2010 is up 2.0 percent from the first quarter of 2009.
  • In March the 10-City Composite was up 3.1 percent from the first quarter of 2009, and the 20-City Composite was up 2.3 percent for the same period.
    • These two indices are reported monthly and have seen improvements in their annual rates of return every month for the past year.

“The housing market may be in better shape than this time last year; but, when you look at recent trends there are signs of some renewed weakening in home prices,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “In the past several months we have seen some relatively weak reports across many of the markets we cover. Thirteen MSAs and the two Composites saw their prices drop in March over February. Boston was flat. The National Composite fell by 3.2% compared to the previous quarter and the two Composites are down for the sixth consecutive month.

“While year-over-year results for the National Composite, 18 of the 20 MSAs and the two Composites improved, the most recent monthly data are not as encouraging. It is especially disappointing that the improvement we saw in sales and starts in March did not find its way to home prices. Now that the tax incentive ended on April 30th, we don’t expect to see a boost in relative demand.

case-shiller-march-2010-metrosFHFA Shows Lower Home Prices in First Quarter Also:

The Federal Housing Finance Agency (FHFA) released their report on first quarter home prices today as well. The FHFA report data and methodology differs from NAR and Case-Shiller, in that the FHFA home price index is based only on the sale prices of homes that are financed with a conforming loan (by Fannie Mae and Freddie Mac’s standards).

The FHFA report for the first quarter of 2010 shows home prices fell 1.9 percent from the quarter before, so not terribly far off from the 3.2 percent decline the Case-Shiller report showed. In contrast to the Case-Shiller report however, the FHFA report showed March’s home prices rose 0.3 percent from February. Also, the FHFA report shows home prices for this quarter fell 3.1 percent from a year ago.

fhfa-march-2010-

St. Louis Home Prices Doing Better:

For the St. Louis metro and surrounding areas, the median home price for the quarter ended April 30, 2010 was $130,000 an increase of 1.6 percent from the prior quarter’s median price of $128,000 and an increase of 8.3 percent from a year ago when the median home price was $120,000.  In case you are wondering, the median home price for the St. Louis area has dropped 3.0 percent in the past six years.

st-louis-median-home-prices-march-2010

Median Home Prices in St. Louis Metro and Surrounding Areas for Past Six Years - Source: Mid America Regional Information Systems (MARIS)

 

st-louis-median-home-prices-march-2010-comparison

Comparison of St. Louis Median Home Prices to Prior Periods - Source: Mid America Regional Information Systems (MARIS)

 

Where are home prices headed?

As we are frequently reminded, “all real estate is local”, so there will be markets that do better than others, but in general I think we are in store for soft home prices for a while. I think after the “sugar-rush” of the tax credit incentive wears off as the deals close over the next couple of months, and the next wave of foreclosures hit the market we will see prices regress again in many markets, enough so to bring overall home prices in the US down modestly in the coming months.