Declining U.S. Home Prices Slow

US Home prices as measured by the Case-Shiller Home Price Index continued their decline in April although at a slower pace. From their peaks, the 10 city index is now down -33.6% whilst the broader 20 city index is down -32.6%. Year over year declines are now getting smaller. We can expect that trend to continue as the declines slow in coming months. (click on charts to enlarge)

However, smaller year over year declines do not mean rising prices or a healthy housing market. 12 metro areas out of 20 continued to experience price declines in April whilst 8 saw price rises. From their respective peaks, 10 metro areas have seen more than -30% declines whilst 8 have experienced greater than -40% declines.

There is evidence of stabilization in some markets but a full blown housing recovery seems some way off. In addition, no one seems to be mentioning the elephant in the room, that being the next gigantic wave of mortgage resets that will get underway toward the end of the year.

Comments

[Ali Mogharabi:]

Agreed. Also what many don't mention is that the data released yesterday was for the month of April, where mortgage rates were very low. Those rates likely drove up demand which upped prices a bit. I don't think it represents any 'trend' and will likely not continue. One more thing ... MBA Mortgage Application Survey index just came in today at its lowest year-to-date.

Jul 01 09:01 AM

[ain't no fo...:]

Increasing amounts of prime mortgages defaulting and going into foreclosure may be giving a false read on sale prices - as these are increasingly thrown into the mix and sold by banks, they will skew the average sale prices up from the levels where it was almost exclusively subprime levels.

That mortgage apps number was terrible - but the guys running this market up don't seem to care.

Jul 01 11:27 AM

[Ted Hurlbut:]

I believe we're in a bottoming phase overall, but the housing market is likely to be a drag on any recovery. There's still too much inventory and unemployment is driving fresh foreeclosures. Housing may have led us into this, but it's not going to lead us out. And the anticipated problems in the commercial real estate market will only increase the headwind.

www.hurlbutassociates.com

Jul 01 12:56 PM

[ain't no fo...:]

"In addition, no one seems to be mentioning the elephant in the room, that being the next gigantic wave of mortgage resets that will get underway toward the end of the year." No one mentions it, much, 'cause everybody is terrified of what this is going to do to whatever efforts are being made at this time to get to the bottom."

Its the same as CRE - even two months ago everybody was tiptoeing around it, minimizing it, projecting it off as something that may or may not impact in the future - now the defaults are rising, bankruptcies are occurring, the fears about being able to successfully roll over financing are increasing.

Rinse and repeat.

Jul 01 02:03 PM