2012-09-11barrons.com

"This increase in home prices, unlike the one that occurred in 2009-2010 as a result of the temporary tax credit for first-time home buyers, looks to be for real," says David Blitzer, chairman of the index committee at S&P Dow Jones Indices. "We probably won't see a V-shaped recovery in housing, with prices overall going up 20% in the next year. But this rally has legs, and prices will definitely be higher next year."

The recent strength seems to have continued in July and August, according to home-price indexes compiled by CoreLogic. Like Case-Shiller, the consumer, mortgage and property research firm tabulates prices based on repeat sales of the same properties, but it releases the data more quickly. CoreLogic said last week that, year over year, home prices nationally had jumped 3.8% in July and an even stronger 4.6% in August. The latter number was based on its pending, rather than completed, home-sale price index.

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TO BE SURE, any sustained recovery in prices faces some formidable obstacles. The "shadow inventory" of residences that are in some stage of foreclosure or whose owners are at least 90 days delinquent on their mortgages stands at 3.1 million--6% of the 50 million home loans in the U.S. In a normally functioning market, the total of distressed properties would be more like 2%.

As we've said here before, there is definitely a mix effect whereby the homes that are selling are doing so from a basis of price strength. Much of the "inventory overhang" of exurban housing of the sort that was selling at the peak is simply not moving. As long as the market largely omits this inventory, it can go up.

Further, the continued health of the market is predicated on the lack of another major economic crisis. As we document on this site, a number of threats are looming -- so homeowners, cross your fingers!


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