Housing | timiacono.com - Part 30

Robert Shiller on U.S. Home Prices

From the other day, Yale Economist Robert Shiller talks about the latest S&P Case Shiller Home Price Index that showed property values are again falling sharply and he notes that there’s no reason to think they’ll go up anytime soon.

They say that market bottoms are made when everyone’s lost interest and that time could soon be approaching for housing here in the U.S., a good example of this being that neither of these two seem much interested in talking about it.

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Case Shiller Home Prices About Flat

Standard & Poor’s reported that the Case-Shiller 10-City and 20-City Home Price Indexes rose 0.2 percent from July to August, but when seasonal factors are taken into account, the indexes were down 0.2 percent and flat, respectively. The nation’s best housing market remains the nation’s capital where home prices rose an impressive 1.6 percent in August and, along with basket-case Detroit, were the only cities with year-over-year gains.

Ten of the 20 cities saw home prices increase in August while 16 cities saw improving annual returns, though, prices continue to decline on a year-over-year basis as the 10-City and 20-City indexes saw annual returns of -3.5 percent and -3.8 percent, respectively.

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New Home Sales Rise. Who Cares?

In an announcement reminiscent of the early stages of the bursting housing bubble about five or six years ago, the Commerce Department reported(.pdf) that new homes sale rose last month, from a downwardly revised annual rate of 303,000 in September to a rate of 307,000 in October. September new home sales were originally reported at a 313,000 annual rate and, when comparing un-revised data to un-revised data, you get a decline in sales, but, comparing revised data to un-revised data produces a gain and rosy headlines.

This kind of rationalization was about all there was to help a lot of real estate investors keep the faith back in 2006. Today, with new home sales running at about one-third the pre-housing bubble rate and with the home building industry flat on its back for the foreseeable future, it’s just kind of an interesting side note.

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A Look at Global Home Prices

More from The Economist, from today’s interactive Daily Chart where, with the exception of the U.K.,  it’s relatively easy to identify which housing bubbles have already burst:

Ireland clearly had the biggest boom/bust cycle, though, some parts of the U.S. (e.g., Nevada, Arizona, California, etc.) would no doubt rival that rise and fall.


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Home Sales Rise, Home Prices Fall

The National Association of Realtors reported that sales of existing homes rose 1.4 percent last month, from a seasonally adjusted annual rate of 4.90 million units to 4.97 million units, however, the median home price fell to $162,500, representing a decline of 2.0 percent for the month and 4.7 percent from a year ago.

Unfortunately, now that the summer selling season has given way to a much slower sales pace during the fall and winter where investors seeking bargains are responsible for a rising share of sales, look for home prices to decline further in the months ahead.

Distressed sales (foreclosures and short sales) accounted for 28 percent of all sales last month, down from a 30 percent share in September, and investors purchased 18 percent of all existing homes in October versus 18 percent in the month prior. Look for both of these metrics to rise in the months ahead.

Total housing inventory fell from 3.40 million units to 3.33 million units and this represents an 8.0-month supply at the current sales pace, down from an 8.3-month supply in September, still almost double the typical 4-5 months of supply.

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