In this hyped-up headline-grabbing world in which we live, those who just glean the headlines will think the real estate market is back in order.
This from Reuters:
U.S. home prices in August rose for the fourth straight month, surpassing forecasts and providing the latest sign that the hard-hit housing market is stabilizing after a three-year slump, according a report on Tuesday.
San Diego’s C-S index went up 1.5% from July to August, 2009, and -8.9% year-over-year.
All it does is give the gleaners a false sense of security that everything is back on track.
Don’t believe it. Instead, look around your local market area – that’s the real truth.
I’m actually hoping this ‘recovery’ idea sinks in good and well with everyone. It will do a number of things:
1. help the buyer credit go away
2. allow the loan limits to drop at the end of the year as scheduled
3. raise interest rates
wife and I have been saving (and living like damn hermits) and so we’ll have an actual down payment when we’re ready. I’d rather buy with high rates at a low price than the other way around.
What is the seasonal/typical price change between July and August? I noticed the YoY was negative.
Is this just a seasonal thing?
congressional elections next year, I would guess the stimulus will start hitting main street where it counts by next summer , Just my opinion.
In short, I would not count on a big drop in home prices by next summer, but this is just my thoughts.
I’ve said all summer that this false dawn is good for housing bears. It throws away the nonsense that rising housing is critical to a strong economy. It’s absolute bull. Otherwise, the 90’s wouldn’t have happened (prices fell until 1996).
Besides, people can’t bear so much negativity (the sky is falling). They just don’t want to focus on it. The sooner people see housing as a use asset, and not as an investment asset, the better off the country will be because we’ll be putting our capital and bank resources towards investing in better assets that actually produce something.
The fall of the empire is due more to internal stupidity than external competition.
Chuck Ponzi
Jonrent,
No offense, and I’m not meaning to single you out here on this, but I’d say about 50% of the responders on this site in general (not specifically this thread) have a serious case of “magical thinking”.
They assume that because people in politics want something to happen that it will. Nothing could be further from the truth. If that were true, the republicans would still have the presidency and the congress.
Things happen because there is a scientific basis for it.
The economy will significantly come back by next year, in spite of the misguided stimulus, not because of it. This stimulus package has incentivized some dangerous and inefficient risk taking; something that does not help with a solid basis for the economy. It will come back in much the same way that the 2003-2004 recovery was a comeback; it was built on cheap money and overconsumption.
What people really should be doing is rebuilding their balance sheets; tilting them more towards diversified assets and less towards liabilities.
Instead, we will see another bubble; this time in commodities. I had hoped it would not come to this, but it seems to be inevitable. The worst part is that people believe the commodities bubble is over (hint: it’s just beginning).
Meanwhile, our currency is headed for serious devaluation. I’d recommend people get their money into a non-bubbled hard asset.
Chuck Ponzi
Everyday reminds me more and more of George Orwells 1984. Being fed one way info from the mass media and now twitter. Obama and his team on the speak-easy. Everything is fine! A majority of America just follows as they really have no options but believe what they see and here as fact! Consumer confidence is at a new low today and the government acts surprised??!! Home prices are going to go up, just like groceries and insurance and auto costs and education. Just the way it is.
I canz haz returnz of “seasonality?”
If the forecasts call for catastrophe, the bar for “surpassing forecasts” is set pretty low.
I’d think it’s obvious that prices are rising, as far as month-to-month goes. It’s also obvious that prices are below what they were a year ago, since they’ve been in decline for most of the last 12 months. See Piggington for illustration:
http://piggington.com/images/sep09ppsf.gif
Maybe it’s just a temporary anomaly, or it’s seasonal, or it’s blah blah blah. You can call it anything you want, but prices are rising. And I’ve been calling the bubble since 2003.
I just roll my eyes every time prices are dropping and permabulls say “no they’re not!” and when prices rise there are people saying “no they’re not!” You two groups of people can’t both be always right. No, you’re both sometimes wrong.
The Associated Press reports:
“NEW YORK (AP) — Home prices rose for the third straight month in August, a key ingredient for a broad and sustained housing recovery.”
So which is it? Have home prices been rising for 3 or 4 months according to the same source(S&P Case-Shiller Home Price Index)?
Basically the foreclosure train has gone through the low end homes, and now is working its way through the middle rung as it eventually stops at the top tier. Since foreclosures make up the majority of sales now, it is obvious that the median price would be rising: basically higher end homes are getting foreclosed and sold now than before… not really the way you want prices to “recover.”
gaswalla is correct in their assumptions
This is a response to the comment posted by Gaswalla:
If the HPI was simply the median price of homes sold during August then the comment could be correct, however…
The Case Shiller Home Price Index is specifically designed to measure NOT the median price of homes sold in the month, but the actual value of homes . This is why it is called the Price INDEX and not the median home price.
From
http://www2.standardandpoors.com/spf/pdf/index/SP_CS_Home_Price_Indices_Methodology_Web.pdf :
The indices measure changes in housing market prices given a constant level of quality.
Changes in the types and sizes of houses or changes in the physical characteristics of
houses are specifically excluded from the calculations to avoid incorrectly affecting the
index value.
The monthly S&P/Case-Shiller Home Price Indices use the “repeat sales method” of
index calculation – an approach that is widely recognized as the premier methodology for
indexing housing prices – which uses data on properties that have sold at least twice, in
order to capture the true appreciated value of each specific sales unit.
case shiller depends on the repeat sales method which looks at the current price vs the last sold price. I submit that many of the top-half tier of homes were refinanced and not actually sold during the housing peak (unlike the bottom half which were sold to flippers and unqualified buyers). When these go in a short sale, they often sell for prices higher than last sold price (in 2000-2003), but a lot less than mortgage owed (which is based on valuation of 2005-2006). This phenomena will be more common as the higher end homes jump on the foreclosure train – but does not really apply to the lower end homes. Either way, you need to acknowledge that lower end homes have completely different dynamics than higher end homes AND we now are moving past the lower end homes to the higher end homes in the current market. That is why the index is higher – because badness is moving up the housing chain.
What says you Jim?
I hate the Case-Shiller index.
It is given more credibility because it was devised by big thinkers, and not NAR.
When we did the post on it a few months back, I read their whole methodology, and it still wasn’t clear. If they only measure houses that sold in August, 2005 AND August 2009, then you would have a decent gauge of off-peak pricing change.
But I think you are right, that they just measure the last two sales of each house that sold in August 2009. Who cares if the previous sale was in 2000, what does the % change between 2000 and 2009 tell you? Nothing.
Once there is a ‘bottom’ of sorts, what will their index be good for?
I agree that it is the ‘premier’ method, but let’s compare apples and apples. When I do same-house sales, I try to at least use those whose previous sale was in the peak period, 2004-2006.