Revisiting: “Home Prices: The Statistic That Matters Most?”by Tim Manni
Back-to-back posts yesterday in the Wall Street Journal’s Developments blog got me thinking once again about home prices. So I spent some time this morning going through some of HSH’s past blog posts to examine our previous thoughts, predictions and expectations for home prices.
Looking over the previous posts I remembered just how much of an emphasis we put on the importance of home prices and their influence on our overall economic recovery.
If two-thirds of American families are losing portions of their wealth every day, and if, like Alan Greenspan, you believe home prices are the ultimate indicator of our pending economic recovery, than it stands to reason that home prices may be the statistic that currently matters most.
Just as winning can erase the bad memories for sports fans, players and coaches (we have playoff baseball on the brain), rising home prices will help to erase some of the foreclosure fears, and will help bring the confidence back to the housing market which it so desperately needs. Unfortunately, predicting when that will happen is easier said than done.
So when I read this morning that Warren Buffett told President Obama that our economic recovery is only about 40% or 50% complete, it really made me want to reiterate how important home prices are to the recovery process:
President Barack Obama heard a sobering message from Warren Buffett when he asked for the investment guru’s views about the economic recovery, according to an interview Obama gave NBC News on Thursday.
“I’ll tell you exactly what Warren Buffett said. He said, ‘We went through a wrenching recession. And so we have not fully recovered. We’re about 40, 50 percent back. But we’ve still got a long way to go’,” Obama told NBC during a visit to Holland, Michigan, to promote his job creation policies.
Back in October of last year, and even before that, we were asking, “Is this it, have home prices finally hit bottom?” It is some eight months later and several signs still point away from us hitting a bottom in terms of home-price declines.
Nick Timiraos of the Wall Street Journal explained yesterday that the expanding home inventory combined with the lack of buyer demand can’t be good for home prices:
The number of homes listed for sale grew in many U.S. cities in June, a month that typically brings a slowdown in listings. Inventory grew amid signs that demand plunged after the expiration of the home-buyer tax credit.
The supply of homes available for sale in 27 major metropolitan areas at the end of June was up 3.7% from one month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif.
Inventories typically decline modestly in June, as the summer slowdown begins. Zelman & Associates, a research firm, says June listings nationally have fallen an average of 0.5% from May over the past 27 years.
If you agree with Greenspan (“The crisis cannot end fully until home prices in the U.S. are at least stabilizing”) and if you agree with Buffett (”we have not fully recovered. We’re about 40, 50 percent back”) then you’re likely to agree with us: home prices may be the statistic that currently matters most.