by Steve Harney on April 28, 2010 ·
Three different home pricing indexes were released in the last ten days: the S&P Case Shiller Index, the First American CoreLogic Home Price Index and the RPX Monthly Housing Market Report. Each report told virtually the same story. House prices remained pretty much the same since the last reporting period (see table below).
The headlines over the next few days will report that prices ‘have stabilized’ or that ‘the worst is over’. Nice thoughts. The only question is: are those claims accurate? Let’s look past the headline and first paragraph of each press release and find the true conclusion of their authors.
Where are prices currently?
All the indexes are released at the same time each month and are often compared as equal representations of current prices. In actuality, each report looks at a slightly different set of data selected from a slightly different time period. (But let’s not get into that in this post.) Here are the findings of each report:
We can see how a cursory examination of the data could bring someone to the conclusion that prices have in fact stabilized. And that is probably true to some degree. But the real question is where prices are headed over the next 6-12 months.
Where do the reports think prices are headed?
Each index discussed the future to some degree. Here is what they said:
S&P Case Shiller Index:
Amidst all the news, however, we should also pay heed to foreclosure activity, which have reached their highest level in at least the last five years. As these homes are put up for sale, we may see some further dampening in home prices.
First American CoreLogic HPI:
The HPI forecast turned less optimistic in the latest update, showing a softer recovery than in previous forecasts. Our forecasts for the inventory of homes for sale have risen as interest rates are expected to rise, tax credits expire, and slower than expected sales over the winter due to the weather are all adding to the inventory. Collectively these effects act to contract demand (put downward pressure on prices) … After a modest increase this spring and summer, the national single-family combined index is projected to decline by 3.4 percent from February 2010 to February 2011 … The preponderance of distressed sales continues to exert downward pressure on the indices.
The RPX Monthly Housing Market Report:
Increasing foreclosures could hurt demand for homes, slowing the housing recovery. In the past, we have discussed the impact of foreclosures on the housing markets mostly in terms of supply: foreclosures increase the inventory of repossessed properties owned by banks, who in turn seek to liquidate that inventory by selling homes at significant discounts, increasing the supply of relatively low-priced homes and putting downward pressure on prices. But foreclosures also pose a threat to housing demand, particularly given the heightened media attention the problem has attracted: potential buyers could delay their plans to purchase a house because they are concerned that foreclosures will induce a second precipitous decline in housing values. Such fears could be self-fulfilling if demand slackens to the point where it can no longer keep pace with foreclosure-driven supply.
Each report warns about uncertainty in pricing as we move forward. As we always say: IT IS A MATTER OF SUPPLY AND DEMAND!
What does this mean to you?
Don’t make a decision based on the headlines over the next few days. If you are considering selling, realize your home is worth more today than it will be tomorrow or next week or next month.