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February 22nd, 2011

Home prices “really close to being at the bottom again”

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5-price-reduced“We’re really close to being at the bottom again,” said S&P’s Maureen Maitland, describing the latest home price figures released from the S&P/Case-Shiller home price index.

According to that data, home prices fell by 4.1 percent in the fourth quarter of 2010, compared to a year earlier:

“We ended 2010 with a weak report. The National Index is down 4.1% from the fourth quarter of 2009 and 18 of 20 cities are down over the last 12 months. Both monthly Composites and the National Index are moving closer to their 2009 troughs. The National Index is within a percentage point of the low it set in the first quarter of 2009. Despite improvements in the overall economy, housing continues to drift lower and weaker.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.

-Read the full press release here-

Only two cities — Washington D.C. and San Diego — measured year-over-year improvements.  What’s even more frustrating is that states which have already experienced especially-deep price declines hit new lows at the end of last year:

“Unlike the 2006 to 2009 period when all cities saw prices move together, we see some differing stories around the country. California is doing better with gains from their low points in Los Angeles, San Diego and San Francisco. At the other end is the Sun Belt – Las Vegas, Miami, Phoenix and Tampa. All four made new lows in December. Also seeing renewed weakness are some cities that were among the last to reach their peaks including Atlanta, Charlotte, Portland OR and Seattle, where news lows were also seen. Dallas, which peaked late, has so far stayed above its low marked in February 2009.” [said Blitzer.]

Market just isn’t growing on its own

A lot of you probably thought we were crazy when we suggested bringing back the homebuyer tax credit for a third time back in September. But as you analyze the latest numbers and trends in the Case-Shiller index, a lot of the blame, or shall I say the explanation, for the declines has to do with the presence (or shall I say absence) of the homebuyer tax credit:

The impact of homebuyer tax credits ended back last spring, and the two quarters of data since then reflect that. Prices fell steeply during the third quarter, down 3.3%. When the credit was in effect, prices rose consistently, up four out of five quarters starting in the second quarter of 2009.

The losses were not unexpected, according to Brad Hunter, chief economist for Metrostudy, a housing market research firm.

“It’s clear now that, going back to last fall, the apparent strength was a false strength,” he said. “Now that the tax credits are gone, we’re back to where the training wheels are off, to normal consumer demand.”

Struggle to recover

What sets the recent downturn and this recovery period apart from others in years past is the fact that housing isn’t leading the way. That said, we’re still making modest gains without housing’s help. For example, consumer confidence hit its highest mark since 2008 “as Americans feel more optimistic about their income prospects and the direction the economy is headed,” writes Ellen Gibson of the Associated Press.

So, when can we expect housing to kick it into gear? It may be a while.

Very few market observers are confident that we have hit a true bottom in prices (a debate that has been going on for years now). How about the Case-Shiller men themselves, what do they say? Turns out they are of slightly-differing opinions.

From MarketWatch.com:

Robert Shiller and Karl Case, the two economists who created the index, disagreed on a conference call with reporters about whether housing has hit a bottom.

Shiller said he feared prices may fall further. He noted several factors, including high oil prices and the high number of foreclosures.

“Bouncing along the bottom sounds optimistic to me,” Shiller said.

“My intuition rates the probability of another 15%, 20%, even 25% real home price decline as substantial. That is not a forecast, but it is a substantial risk,” Shiller said.

Case responded there was “a chance” that we are at the bottom, although he added it was not something he would say with confidence.

“It looks like even the pessimistic indicators are flat,” Case said.

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One Response to “Home prices “really close to being at the bottom again””

  1. Tweets that mention Home prices “really close to being at the bottom again” | HSH Financial News Blog -- Topsy.com Says: February 22nd, 2011 at 2:56 pm

    [...] This post was mentioned on Twitter by HSH Associates, Roberto Mazzoni. Roberto Mazzoni said: Home prices “really close to being at the bottom again”: “We’re really close to being at the bottom again,” said… http://bit.ly/i3qvnN [...]

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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