Did the U.S. Housing Market Bottom in Late 2008?

WASHINGTON, DC – U.S. home prices rose 0.7% on a seasonally-adjusted basis from January to February, according to the Federal Housing Finance Agency’s monthly House Price Index. January’s previously reported 1.7% increase was revised to a 1.0% increase. For the 12 months ending in February, U.S. prices fell 6.5%. The U.S. index is 9.5% below its April 2007 peak.

The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine Census Divisions, seasonally-adjusted monthly price changes from January to February ranged from –1.2% in the East North Central Division to +3.8% in the Pacific Division.

The chart above shows that the OFHEO Home Price Index increased in each of the last two months, following a 20-month period of 18 monthly decreases. The two consecutive month increase in home prices in January and February 2009 was the first time in almost two years that the index increased two months in a row (since March and April 2007). The chart also suggests that housing prices may have bottomed out at the end of 2008, and we might now be in a period of sustained price increases and a housing market correction.

Comments

[Moon Kil Woong:]

Thanks for the post. I have a feeling this may be due to he fact California home prices sell for considerably more than most of the rest of the US and that for some reason I heard a lot of LA area sales were pushed through in California at the beginning of the year.

Despite my skepticism, I always like substantive facts to challenge my perception which is currently that the housing market is not much better than it was 6 months ago. If in fact this is true, it may be another signal that tech may be making a comeback and is even trickling down to support Californian property.

We can all hope this is the case, but I'll keep waiting before I'm willing to take it as a fact.

Apr 23 03:37 AM

[tunaman4u2:]

No way

Apr 23 09:43 AM

[Radardoc:]

In response to the question posed by the article title: No

As I've said in other posts, if you need a home, AND the rent/own value in your market is right, AND you have the liquidity to qualify, AND you are confident in your income stream, AND you plan to stay there long-term, AND you can afford the mortgage...go ahead and buy. However, you should realize that at least in the short term (the next decade) you must either take your anti depressants or avoid reading about property values.

As an investment, house hunting season is closed.

Apr 23 12:46 PM

[TracingError:]

Whatever the reliability of this data (which contradicts Case-Shiller), it is worthless to throw it out there without considering market conditions. I.e. due to foreclosure moratoriums, many impaired houses were held back from the market, artificially raising prices on houses that did transact. As the data shows, that has changed. There is no way to maintain prices when supply is so vast.

Apr 23 01:09 PM

[puzzled by ...:]

Interesting, but I'll wait for Case Shiller to tell the real story.

Apr 23 01:56 PM

[AGreenspan:]

After reading this article, I'm glad that I didn't go to University of Michigan for business school.

Apr 23 03:06 PM

[HardwoodFlo...:]

Mark- It would be interesting to see this graph laid over the new home starts. It seems to be very close. Even the head fake in 07 is on both graphs. I don't know what that means, if it means anything at all. There probably isn't a corollary.

I can't say we will see a continued and sustained "increase in prices". Employment is an issue. It is almost impossible to get a JUMBO and they aren't tha much of a savings if you wrote on in 2005-2006. With out moving JUMBOs the big ticket houses prices won't come in. You might see the bottom feeding subside however.

There is another element which might really kick this up. When the FEDs make $750K the cap on FHA loans. Right now you can't get an FHA on anything above $450k. This will make a huge difference in the "price to house "ratio of what is being reported.

While the mid-west, parts of the north east, mid atlantic and Pacific Northwest and some states like CO, MT are strong or getting stronger- it will take along time for CA, AZ, NV, GA, FL and the other states where prices will remain retarded with oversupply and escalating foreclosures.

Apr 23 04:43 PM

[No1:]

Why is it that no one mention the moratorium that many financial institutions placed on foreclosing homes in the the 4Q08? That moratorium was over in at the end of 1Q09.

That MUST have an impact on home prices. Short term raising prices like a junkie getting a quick fix only to crash.

Apr 23 09:34 PM