Are home prices even higher than reported?by Peter Miller
For millions of American homeowners, higher home prices would bring absolute relief. Higher—if not rising—home prices would mean fewer short sales, more refinances and increased inventory as more sellers would be confident enough to re-enter the market. Not to mention rising home prices would boost household wealth nationwide.
According to the latest S&P/Case-Shiller home price report, there is good news on several fronts:
- Home prices nationwide rose 1.2 percent in the second quarter when compared with 2011
- Home prices gained 6.9 percent from the first quarter to the second quarter (that’s a substantial gain when you consider the price trends over the past five years)
- In the 10- and 20-city composites were up annually 0.1 percent and 0.5 percent, respectively
- On a monthly basis, the 10- and 20-city composites did fairly well, rising 2.2 percent and 2.3 percent, respectively
“Home prices gained in the second quarter,” said David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “In this month’s report all three composites and all 20 cities improved both in June and through the entire second quarter of 2012. All 20 cities and both monthly Composites rose for the second consecutive month. It would have been a third consecutive month had we not seen home prices fall in Detroit back in April.”
Given that recent mortgage rates have been hovering at or near historic lows, it’s hard to imagine that home prices would not show at least some strength at this time. Furthermore, there is, after all, if a lot of pent-up demand. There are fewer homes for sale, and since many prospective homebuyers are in the market for non-distressed properties, more and more non-distressed homes are receiving multiple offers, allowing sellers to charge about 5 percent more than they did more than six months ago, said Everett King, president of ERA King Real Estate in Birmingham.
Can rising home prices be sustained?
The big question raised by the latest Case-Shiller report is whether rising home prices can be sustained.
For that to happen, the economy needs to continually improve, and that means greater employment stability. While there is some evidence that the economy has stabilized and that the public recognizes that some gains have been made, unemployment remains too high to generate much confidence.
Are prices even higher than we think?
But is the nation’s current home price situation even better than the Case-Shiller report lets on? According to some of the other national home price indexes, the answer is yes.
Since Case-Shiller only reports on homes that have been sold, the latest report—which only takes us through June–may include data from as early as March or April. Translation: home prices may have risen a lot faster and much more substantially than what was reported on Tuesday.
“It suggests that we’ll continue to see increases in the Case-Shiller at least through September, which will be the sales they report in November,” said Trulia chief economist Jed Kolko.
It’s going to be an interesting four months
But there’s still a lot of uncertainty remaining before the year is out. It’s an election year, and governments at every level are going to push out every possible project before Election Day in order to bump up the perception of economic growth. And waiting in the wings is the Federal Reserve who may take additional steps in order to promote economic expansion.