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Sales Are Up. Prices Still Have a Way To Go.


We believe the housing market is recovering. We believe that sales will be robust through the rest of the year. However, we also believe that the increase in demand will not impact prices in a big way as we think there will also be an increase in the supply of homes coming to the market. This increase in supply will offset the increase in demand. The increase in supply will be fueled by two categories of inventory:

  1. Foreclosures entering the market as a result of the National Mortgage Settlement
  2. Pent up supply of homeowners who have been unable to sell their homes over the last several years

There have been several recent headlines making strong statements about home values in the country. We must be sure to read the ENTIRE report - not just the headlines. Here are four headlines and the portion of the report that reflects the caution in their ‘cautious optimism’.

HEADLINE:

LPS Home Price Index Shows U.S. Home Price Increase of 0.2 Percent in February; Early Data Suggests Further Increase of 0.3 Percent is Likely During March

CAUTION:

“Reasons for caution are clear, as we’ve been here before. Non-seasonally adjusted prices increased for a few months in early 2009, 2010 and 2011 – trends that all ended by summer, after which all the gains – and then some – were lost. As is true this month, those temporary increases were on low sales volumes – about 30 percent lower than at any point since 1998. Furthermore, the inventory of distressed homes remains high, which will continue to put a drag on prices.”

HEADLINE:

Foreclosure hotspots show signs of housing turnaround

CAUTION:

“However, much will depend on the continued health of our economy, specifically job rates, and how lenders will release their foreclosure inventories now that the 49 state AG Agreement has been signed."

HEADLINE:

Fiserv Expects Home Prices to Stabilize

CAUTION:

“On the other hand, nearly one-half of the metro areas, or 191, saw prices decrease by more than 2 percent, including double-digit losses in Atlanta (-12.8 percent), Reno, Nevada (-10.8 percent), and Tucson, Arizona (-10 percent).

In the fourth quarter of 2011, the average price of a U.S. single-family home fell four percent from the year-ago period, and Fiserv Case-Shiller projects a further decline of 0.8 percent by the end of 2012.”

HEADLINE:

Home Prices in March Show Monthly Gain: CoreLogic

CAUTION:

“Even with price gains above 5 percent for leading states and CBSAs, Capital Economics said in response to the CoreLogic report that over the year, prices are more likely to stabilize rather than make a dramatic climb.

“There are fears in some quarters, triggered by recent disappointing GDP and payrolls data, of a sharp slowdown in economic growth which could derail the fledgling improvement in the housing market,” said Paul Diggle, property economist for Capital Economics.”

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4 Responses to “Sales Are Up. Prices Still Have a Way To Go.”

  1. Ruthmarie Hicks May 15, 2012 at 10:49 am # Reply

    I personally am seeing price increases AND decreases in the same radial geographic area.  You have to know these markets very well to maneuver them.  Just one or two blocks can make a big difference. 

  2. Ruthmarie Hicks May 15, 2012 at 10:55 am # Reply

    Whoops....I can't edit this once sent... The other thing I think that buyers need to understand is that this uncertainty isn't license to try and create disaster scenarios to hammer away at already low prices and amazing mortgage rates.  I'm running into a lot of buyers that simply want to make a "killing".  They aggressively lowball everything and wonder why they can't buy a home.  We don't have crystal balls.  You have to work with the market as it sits in the present tense.  Too many buyers would view a post like this as an invitation and justification to lowball even more. 

  3. Harj May 15, 2012 at 11:58 am # Reply

    You people are FANTASTIC. I love your clear and concise explanations about what's "really" going on in the market place. Not only do you provide much needed information for real estate agents to be more effective at their job, but I personally think anyone thinking of buying a home should sign up for a subscription. Well done for being a shining light of honesty in a misty haze of contradictions.

  4. shaira May 16, 2012 at 11:43 pm # Reply

    Not all happy endings. Well, We have got to stay tuned to whatever is happening and not just rely on positive notes we read.

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