To sum up the latest Case-Schiller Housing Price Report, the good news is that the bad news is not quite as bad as it was. But the bad news is that Atlanta, Las Vegas, Chicago, Portland and New York have hit new lows as home prices in these cities continue a slow but steady slide.
There is no sign of a big turn around in housing as of yet, but at least the lows in many cities were less than reported for previous periods. All in all, the national composite index is down 35.1% from the market peak in 2006. But, the bright spot, if you want to call it that, is that price reductions are slowing, and year over year, a majority of the cities listed in the 20 city composite showed losses that were less than in 2011. So perhaps it’s fair to say that the situation is “improving”, sort of like saying that your tooth ache is not as bad as it was yesterday. Your problem is not going away, but at least you feel better.
But for those five cities which have breached new “post crash” lows, the difficulties continue. These five cities also represent the heart of the overbuilding, over-development problems. Initially it was a large inventory of newly built properties that went unsold, followed by a large number of foreclosures in the new construction sector. That has been followed by the foreclosures triggered by the resulting job losses from the first wave.
The cities such as Atlanta, which have now reached new lows in pricing, are plagued by high vacancies and a lot of extra inventory on the market. Foreclosures have become the “second wave” for these cities, as homeowners struggle with job and income losses. Banks are holding quite a bit of “shadow inventory” off the market, in an attempt to avoid further price cuts, but sales of existing inventory are down due to the tight credit situation, and the difficulties in qualifying for a new mortgage.
Still, there are few surprises in this report. It’s pretty much “more of the same” and the news is not unexpected. I might also interject that once the spring and early summer selling season has ended, the price declines will be deeper than these early spring data indicate. Home sales are a very seasonal issue, and early spring to summer sales often post the highest demand and highest prices of the year. One could post a reasonable argument that further declines will show up across more cities as we move into the fall, when home sales and prices traditionally weaken.
The latest jobs report, just out last Friday, could be forecasting lower home prices ahead, due to a much worse than expected employment scenario.
On top of that, the latest crisis in Europe threatens to spill over into the U.S. economy, as problems in Europe are likely to weaken demand for U.S. made goods. This could result in further job losses or slower job growth for the U.S. as 2012 progresses. If this happens, we could see broader declines in home prices for more cities later this year.
Home buyers who plan to be in the market this year, but have some flexibility in terms of when they need to buy, can probably expect to find even lower prices than we have now, after the summer selling season ends.
Donna S. Robinson is a 16 year veteran of the Real Estate industry, with experience as a licensed agent, rental property manager, and real estate investment advisor. Her website is www.RealtyBizConsulting.com