Have Home Prices Stabilized or Not?
I put this out in my Newsletter this month and thought you might be interested.
Many analysts and groups have been predicting that 2012 will be the year when home prices finally hit bottom and stabilize before heading back up. After the first few months, it is hard to tell what is truly going on with home prices, especially in the face of three recent reports that all give different accounts of price movement.
The latest home price index from S&P/Case-Shiller posted a 0.8 percent monthly decrease in prices in February for both the top 10 and 20 major metropolitan areas. Compared with the previous year, the 10-city index showed a 3.6 percent decline in prices, while the 20-city index fell 3.5 percent.
One blatant sign that home prices have not yet bottomed out is that nine of the major metro areas – Atlanta, Charlotte, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle, and Tampa – were down to their lowest levels since the housing bubble burst. Atlanta was hit the worst with a yearly price drop of 17.3 percent.
“While there might be pieces of good news in this report, such as some improvement in many annual rates of return, February 2012 data confirm that, broadly speaking, home prices continued to decline in the early months of the year,” said David Blitzer, chairman of the index committee at S&P Indices.
On the other side is the Radar Logic Residential Property Index (RPX) Composite Price, which reported that home prices actually grew 1.9 percent in February across the top 25-major metro areas. Still, the RPX Composite Price was down 3.18 percent from February 2011.
The uptick in monthly sales may have been a factor of weather, according to Radar Logic’s press release. “The strong month-over-month gains in home prices and sales activity in February may also be a consequence of the mild weather across much of the country this winter. The mild climate may have facilitated home shopping… As a result, February’s strength likely will come at the cost of weakness later in the buying season. On a multi-year trend basis, home prices will likely continue to show declines throughout the year.”
Another market survey from housing data collector Zillow, this time reporting March prices, found that home prices rose 0.5 percent from February, but were still down 3.1 percent from the same time in 2011.
The Zillow report, however, stressed that there is not truly a “national housing market,” but instead that price changes are more effectively analyzed by metro area. For example, Phoenix and Miami actually posted substantial yearly price gains in March, 3.5 percent and 2.7 percent respectively, especially for being areas where the housing crisis hit worst. And on the other side are areas like Atlanta and Chicago, where the local economies remain weak and the housing markets still have huge inventories of foreclosed properties. For the year, Atlanta experienced an 8.7 percent decline and Chicago has a 9.1 percent price decrease.
The analysts behind the Zillow survey were also cautious to not declare any of the areas’ price gains as permanent, recognizing that shadow inventories of foreclosures may yet come to light and put downward pressure on prices. Overall, it’s difficult to tell exactly where home prices are headed in 2012. Pending foreclosures will play a big part, as will any movement in the unemployment rate and growth in GDP. We’ll just have to wait and see.