Published: Sunday, February 28, 2010
Signs of life in real estate? Maybe not
Home prices creep upward, but a steep drop in sales unnerves analysts
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In this photo made Feb. 22, 2010, a sold sign sits outside a new home in Houston. Sales of new homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.(AP Photo/Pat Sullivan)
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Associated Press
Home prices gained 0.3 percent in December, the seventh straight monthly increase.
LOS ANGELES — Home prices gained for the seventh consecutive month in December as cities on the West Coast posted the biggest rises, according to the closely watched index released last week.
The Standard & Poor’s/Case-Shiller index of 20 metropolitan areas scored a modest 0.3 percent increase on a seasonally adjusted basis.
That’s not huge, but analysts were cheered that prices didn’t dip and 14 cities posted increases, including hard-hit markets such as Los Angeles, San Diego and Phoenix.
“We have another month of encouraging data,” said Michael D. Larson, a housing and interest rate analyst with Weiss Research. “You have broad-based stabilization in housing, but no rip-roaring rebound.”
While prices along the West Coast were generally positive, home sales across most of the nation were poor in January, according to another report last week.
Sales of new U.S. homes plunged 11.2 percent in January to a seasonally adjusted annual rate of 309,000, the lowest rate on record dating back to 1963, the Commerce Department estimated.
The third-straight drop in sales on a month-to-month basis was unexpected.
“The housing market remains very, very distressed,” wrote Dan Greenhaus, chief economist for Miller Tabak & Co.
Analysts said the heavy snows in much of the country affected sales.
“There may have been some weather-related issues playing havoc with the sales data but clearly, these results are extremely unnerving,” wrote Jennifer Lee, an economist for BMO Capital Markets. “There is nothing positive to glean from this report.”
The price index is an average of three months, so December’s results included sales of homes that closed in October, November and December.
During both October and November, demand for homes surged prior to the expiration of a tax credit for first-time buyers.
Los Angeles was the biggest winner out of the 20 cities with home prices up 1.4 percent in December over November. Seattle, which includes Snohomish, King and Pierce counties, was up 0.2 percent from November on a seasonally adjusted basis.
San Diego was up 1.1 percent and San Francisco increased 1 percent. Analysts attributed the California gains to many investors seeking to scoop up foreclosure properties and buyers taking advantage of cheap prices.
“California is an efficient market,” Cameron Findlay, chief economist at LendingTree.com, said. “Buyers are more astute in terms of monitoring market changes and, in general, they will always lead the market out of a recession.”
Case-Shiller compares sales of detached houses with previous sales and account for factors such as remodeling.
Although prices were up from the previous month, they were still lower than a year ago. The index for 20 cities was down 3.1 percent compared to December 2008.
In a separate Case-Shiller index, national prices were down 2.5 percent in the fourth quarter compared to the same period in 2008. But that’s far better than earlier in the year, when the index was down 19 percent in the first quarter, 14.7 percent in the second and 8.7 percent in the third.
“As measured by prices, the housing market is definitely in better shape than it was this time last year, as the pace of deterioration has stabilized for now,” said David M. Blitzer, chairman of the S&P Index Committee. “However, the rate of improvement seen during the summer of 2009 has not been sustained.”
Still threatening a substantial housing recovery this year is the potential for more foreclosures as Americans lose their jobs and fall behind on their house payments. In particular, experts are worried about “strategic defaults,” where homeowners walk away from properties because they owe more on their mortgages than the properties are worth.
More than 11.3 million homes, or 24 percent of all properties in the U.S. with mortgages, were in a negative equity position at the end of the fourth quarter of 2009, according to data released Tuesday by First American CoreLogic. That was an increase from 10.7 million, or 23 percent, at the end of the third quarter.
“Going forward, forces that will bring home prices back down are growing,” Patrick Newport, wrote economist at IHS Global Insight in a note to clients. “The big unknown about foreclosures is whether another surge is in the cards because of strategic defaults.”
The Standard & Poor’s/Case-Shiller index of 20 metropolitan areas scored a modest 0.3 percent increase on a seasonally adjusted basis.
That’s not huge, but analysts were cheered that prices didn’t dip and 14 cities posted increases, including hard-hit markets such as Los Angeles, San Diego and Phoenix.
“We have another month of encouraging data,” said Michael D. Larson, a housing and interest rate analyst with Weiss Research. “You have broad-based stabilization in housing, but no rip-roaring rebound.”
While prices along the West Coast were generally positive, home sales across most of the nation were poor in January, according to another report last week.
Sales of new U.S. homes plunged 11.2 percent in January to a seasonally adjusted annual rate of 309,000, the lowest rate on record dating back to 1963, the Commerce Department estimated.
The third-straight drop in sales on a month-to-month basis was unexpected.
“The housing market remains very, very distressed,” wrote Dan Greenhaus, chief economist for Miller Tabak & Co.
Analysts said the heavy snows in much of the country affected sales.
“There may have been some weather-related issues playing havoc with the sales data but clearly, these results are extremely unnerving,” wrote Jennifer Lee, an economist for BMO Capital Markets. “There is nothing positive to glean from this report.”
The price index is an average of three months, so December’s results included sales of homes that closed in October, November and December.
During both October and November, demand for homes surged prior to the expiration of a tax credit for first-time buyers.
Los Angeles was the biggest winner out of the 20 cities with home prices up 1.4 percent in December over November. Seattle, which includes Snohomish, King and Pierce counties, was up 0.2 percent from November on a seasonally adjusted basis.
San Diego was up 1.1 percent and San Francisco increased 1 percent. Analysts attributed the California gains to many investors seeking to scoop up foreclosure properties and buyers taking advantage of cheap prices.
“California is an efficient market,” Cameron Findlay, chief economist at LendingTree.com, said. “Buyers are more astute in terms of monitoring market changes and, in general, they will always lead the market out of a recession.”
Case-Shiller compares sales of detached houses with previous sales and account for factors such as remodeling.
Although prices were up from the previous month, they were still lower than a year ago. The index for 20 cities was down 3.1 percent compared to December 2008.
In a separate Case-Shiller index, national prices were down 2.5 percent in the fourth quarter compared to the same period in 2008. But that’s far better than earlier in the year, when the index was down 19 percent in the first quarter, 14.7 percent in the second and 8.7 percent in the third.
“As measured by prices, the housing market is definitely in better shape than it was this time last year, as the pace of deterioration has stabilized for now,” said David M. Blitzer, chairman of the S&P Index Committee. “However, the rate of improvement seen during the summer of 2009 has not been sustained.”
Still threatening a substantial housing recovery this year is the potential for more foreclosures as Americans lose their jobs and fall behind on their house payments. In particular, experts are worried about “strategic defaults,” where homeowners walk away from properties because they owe more on their mortgages than the properties are worth.
More than 11.3 million homes, or 24 percent of all properties in the U.S. with mortgages, were in a negative equity position at the end of the fourth quarter of 2009, according to data released Tuesday by First American CoreLogic. That was an increase from 10.7 million, or 23 percent, at the end of the third quarter.
“Going forward, forces that will bring home prices back down are growing,” Patrick Newport, wrote economist at IHS Global Insight in a note to clients. “The big unknown about foreclosures is whether another surge is in the cards because of strategic defaults.”
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