U.S. home prices fell in most major cities for the second straight month, further evidence that the housing recovery will be bumpy.
The Standard & Poor’s/Case-Shiller index released recently showed prices dropped in October from September in 19 of the 20 cities tracked.
Prices in a majority of cities declined for the second straight month, reflecting the typically fall slowdown after the peak buying season. Prior to that, prices had risen for five consecutive months in at least half of the cities tracked.
The Case-Shiller index covers half of all U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The monthly data are not seasonally adjusted.
Americans are reluctant to purchase a home more than two years after the recession officially ended. High unemployment and weak job growth have deterred many would-be buyers. Even the lowest mortgage rates in history haven’t been enough to lift sales.
Some people can’t qualify for loans or meet higher down payment requirements. Many with good credit and stable jobs are holding off because they fear that prices will keep falling.
Sales of previously occupied homes are barely ahead of 2008’s dismal figures — the worst in 13 years. And sales of new homes this year will likely be the worst since the government began keeping records a half century ago.
If you are anywhere near the thought of buying a house, you should do it right now. Today.
Rates are crazy low, home prices are crazy low, and supply far exceeds demand. There is no better time. And we’re not the only one saying this.
Remember John R. Talbott? He wrote “The Coming Crash in the Housing Market” (2003) and “Sell Now! The End of the Housing Bubble” (2006). Well, guess what he’s saying now? Buy, buy, buy! Or refinance, refinance, refinance!
Talbott makes some great points about how current home prices compare to construction and replacement costs and how incomes are currently comparing to rent prices. If you’re on the fence about buying or refinancing, reading the complete article may help you make up your mind.
Then call one of our Broker Experts, who can tell you how all this applies to your specific situation.
Most of the good news relates to the overall economy, but there are glimmers for housing too.
The Commerce Department recently reported that new home sales rose 5.7% in September to a 313,000-unit annual pace. This is up from 296,000 in August, and larger than the 300,000-unit number that many economists projected. Data through August 2011, released in late October by S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed increases of .2% for August versus July in major cities.
It is also noteworthy that these modest improvements are occurring during a period of very tight mortgage lending standards. When those standards return to more traditional levels we’ll see more buying activity. Unfortunately the large inventory of distressed properties continues to hold down the housing recovery. Sales remain slow largely due to our weak economy, and overall housing prices are likely to drop again in 2012.
Despite the bad part of the news more economists are coming to believe that we’re at or near the bottom of the housing market. The Administration’s recently announced changes to the HAMP program should also help, although the limited success of earlier HAMP initiatives suggests we shouldn’t expect any miracles. There’s also nothing to suggest that the current low mortgage interest rates will face significant inflationary pressures in the near term. Also encouraging is that home ownership still remains a popular goal despite a decline in housing values than began five years ago. Hanley Wood’s Housing 360 Survey recently revealed that 89% of owners and 59 percent of renters believe home ownership is important to the American families. One third of renters and about 20% of existing homeowners believe it’s a good time to buy a home and plan to buy a home in the next two years, according to the survey.
The Commerce Department recently reported that the economy grew 2.5% in the third quarter, not enough to suggest a roaring recovery, but enough to demonstrate that the economy isn’t backsliding. Spending by consumers also grew, reinforcing that conclusion. There’s good reason to believe that recovery of the housing market can begin if other economic factors turn positive.
More recent signs for the overall economy are encouraging, and could contribute to the recovery of the housing market next year. The stock market has done well in recent weeks, buoyed by progress in Europe to address its debt woes. New orders for durable goods rose 1.7% last month. Orders for nondefense-related capital goods increased 2.4%. These are indicators of business investment and typically presage new job creation.
Significant challenges still remain. The Hanley Wood survey also revealed that many homeowners and renters are in no great hurry to buy because of the soft economy. If Congress fails to make significant progress on reducing the deficit, a real possibility, the stock market and consumer confidence could plunge. Most economists believe the nation needs a sustained growth rate of about 3% before we start generating the new jobs that will be critical to the recovery of the housing market, and we’re not there yet. Still, there are enough positive signs at this point that next spring could be the turning point for the US housing market.
The housing market, which has struggled with an oversupply of homes for years, faces a new problem now: a lack of attractive inventory.
There were more than 2.19 million homes listed for sale at the end of September, down 20% from a year earlier, according to a new report from Realtor.com. That is the lowest level since the company began its count in 2007.
The report is indicative of how the U.S. housing market just can’t seem to catch a break. While falling inventories normally are a sign of health, because reduced competition can boost prices, that isn’t the case right now.
Instead, people are pulling their homes off the market rather than try to sell them at today’s discounted prices. At the same time, banks have been more slowly moving to take back properties through foreclosure ever since processing irregularities surfaced last fall, temporarily reducing the supply of foreclosed properties. The shrinking supply isn’t driving up prices because demand is soft.
The drop in inventory also suggests there are fewer opportunities for buyers and sellers to make deals. That can further chill sales, as buyers become afraid to overpay while sellers are similarly cautious about underpricing their homes.
The Realtor.com data include only single-family homes, townhouses and condominiums listed for sale on more than 900 multiple-listing services across the country. They don’t include unsold homes listed as “for sale by owner” or other properties that don’t find their way onto the multiple-listing services.
Mortgage rates have fallen to their lowest levels in decades, but demand remains weak and credit standards tight. According to the Mortgage Bankers Association, mortgage applications for home purchases were 3% below year-ago levels during the first week of October.
Home prices in the U.S. rose 0.8 percent between June and July, marking the fourth consecutive monthly increase, the Federal Housing Finance Agency (FHFA) said recently.
The agency’s House Price Index (HPI) has been trending upward since April of this year. That string of gains is coming off a streak of declines that was three times as long. Prior to April, FHFA’s HPI had been on a slippery downward slope for 12 straight months, going back to May 2010.
The federal agency’s index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae and Freddie Mac.
Looking at the 12 months ending in July, U.S. homes lost 3.3 percent of their value, according to FHFA’s assessment.
The July index reading is 18.4 percent below its April 2007 peak and roughly the same as the March 2004 index level.