Home Prices Rise In Latest Case-Shiller Report, But…

It may not signal the end of the problems for housing, but the Case-Shiller home price index is finally beginning to trend towards some encouraging news. Home prices for June rose an average of 1.1% in most major markets. This was the third month in a row showing positive uptick in home prices.

Property prices reach bottom limit

Home prices unlikely to sink much more © Gino Santa Maria - Fotolia.com

But, if you view the chart, you’ll see that this is pretty much a case of bouncing along the bottom. I think the good news here, is not so much that home prices rose, because they are still down almost 5% over the same period in 2010. The good news is that we’re probably at the bottom of the housing market in terms of price erosion.

Prices are finally getting into alignment with average income levels. When you view the chart you can see that we are still well below the peak levels from 2006. Only an economic boom of massive proportions will ever get us back to those peak levels. But this data does indicate that we’ve probably finally hit a “bottom” of sorts.

Let’s not forget that this positive trend covers April, May and June of 2011. In any year, those are always three of the best months for home sales. If you don’t show a positive trend for those three months, your housing market is “dead in the water”. So, we’d expect some kind of uptick during those months. The real test of the housing market and the overall economy is whether home prices will show an over all increase year-over-year, when 2011 numbers are compared to 2010.

It’s likely that the trend will continue to show a slightly positive sign through the month of July. That data won’t be out for a while. If home prices actually managed to stay on the positive side through September or October, that would be significant progress. It’s easy to show positive home sales numbers in the spring and early summer. Fall and Winter are another story. But we’ll continue to watch this data closely for the next few months. If we don’t fall back into a downward trend, and remain flat, that in itself will be a very encouraging sign.

Still, the combination of high unemployment and low housing activity continue to be an economic “whirlpool”. We need higher employment to buoy housing sales, yet at the same time, the depressed housing activity continues to drag employment down with it. But if we’re finally at the point where prices will stabilize, and lower income borrowers can begin to qualify again, we could finally see some significant improvement in housing and unemployment going into 2012. Only time will tell.