Home prices may be more stable than we thinkby Tim Manni
This has been the case with the mortgage and real estate markets. How many different times—on this blog alone—have we reported that mortgage rates reached new lows? How many times have you heard that home prices have finally hit bottom?
After a while, it’s easy to lose sight of how significant certain movements of these two indicators actually are. One analyst has come out and said exactly that. When it comes to home prices, people aren’t paying enough attention to their recent improvements, said Barclays analyst Stephen Kim.
Non-distressed home prices improving
“In the absence of a government homebuyer incentive, prices for non-distressed home sales have stabilized for almost a year!” said Kim in a recent note to investors. “In our opinion, this is the most important trend in the housing industry right now, and we are amazed at how little attention it has been getting from the media and the Street. Meanwhile, we point out that this stability on the part of non-distressed prices has occurred despite a very high share of distressed activity and continued declines in overall prices.”
Kim’s point is this: Sure, distressed properties weighed down overall measures of home prices, but when you examine non-distressed prices on their own, the data reveals that we may have hit bottom and things may be well on their way to improving, especially as we move into next year.
Not everyone agrees
But not all market analysts agree with Kim. While you can certainly separate the distressed and non-distressed portions of the market in analytics, the reality is they coexist, says HSH.com’s own Keith Gumbinger.
“You can’t simply ignore the part of the market you don’t like,” says Gumbinger, referring to the role distressed properties play in the overall housing market.
“It certainly stands to reason that non-distressed properties are selling at a greater pace since distressed real estate faces a difficult road in the marketplace,” he says. ”Non-distressed properties sell more quickly and efficiently than their distressed counterparts, and non-distressed sellers are more likely to be able to hold the line on prices since they aren’t necessarily desperate to sell or need to sell at a loss.”
Gumbinger continues, “Transactions of non-distressed sales, the largest portion of the market, are faster, cleaner and the properties are more likely to be better maintained, providing important support for prices since the deals are likely to actually happen, unlike short sales, for example.”
Don’t throw caution to the wind
For years, everyone agreed things were bad. But now, we’re starting to see different analyst come out and say things are improving or they’re at least providing timetables on when that improvement might occur.
Count us among those who believe things will be better, especially as we move into next year. But don’t throw caution to the wind. Do we believe that Stephen Kim’s observation is ‘the most important trend in housing that no one is talking about’ as proclaimed on Business Insider this week? No. But it’s another indication that things are moving in the right direction.