The Wall Street Journal
24 April 2012
Fresh economic benchmarks painted a mixed picture of the nation’s housing market, reflecting a sector that is inching forward amid fits and starts.
The most closely watched indicator Tuesday was the Standard & Poor’s/Case-Shiller index, which tracks home prices in 20 cities. The index hit a new low in February, falling 3.5% below its year-earlier mark to a level not seen since late 2002. But the decline represented an improvement from a corresponding 3.9% year-over-year drop recorded in January or the 4.1% drop in December.
After adjusting for seasonal factors—to take into account the slower winter selling season—the Case-Shiller index showed that home prices in February were actually up from January by 0.2%. And prices are rising in a larger number of metropolitan areas. The Case-Shiller index showed that five cities—Phoenix, Miami, Minneapolis, Denver and Detroit—saw home prices above year-earlier levels in February. In nine others, including Atlanta, Chicago, Las Vegas and Seattle, prices fell to new lows.
The monthly new-home sales report also was better than it appeared on the surface. Overall, sales fell in March from February, but ran ahead of last year’s pace by 7.5%, according to the Commerce Department. The decline in March was less disappointing than it initially appeared because of a sharp upward revision to February’s sales tally.
“It’s all a matter of perspective. The first quarter was materially better than last year, but it remains very weak by historical standards,” said Thomas Lawler, an independent housing economist in Leesburg, Va.
Sales figures for January and December also were revised up, pushing new-home sales during the first quarter to 17% above the same period last year. The median price of a new home jumped 6.3% in March.
Separately, an index from the Federal Housing Finance Agency showed that home prices in February turned positive from one year ago. The 0.4% gain in home prices represents the first increase the index has measured since July 2007. The FHFA index, which looks only at mortgages backed by Fannie Mae and Freddie Mac, contains fewer foreclosed properties than the Case-Shiller index.
“If you’re looking at year-over-year numbers, it shows a clearer trend that we’re doing much better than we were last year,” said Stan Humphries, chief economist at Zillow Inc. The real-estate firm is set to release its own index Wednesday showing that home prices in March posted their largest monthly increase since 2006, before the housing market peaked.
The rest of the year is shaping up to be “a good year for sales, even though prices for a lot of these markets are going to float a little bit lower,” said Mr. Humphries. He expects prices to rise by 6.5% in Phoenix over the next year, and by 5.6% in Miami, which have both seen a surge of investor-driven purchases after values fell by more than half.
But in Atlanta, where prices are down by 8.7% over the past year, Mr. Humphries estimates prices will fall by another 4.1% over the next year. Chicago, which has seen a 9.7% decline over the past year, is looking at another 3.8% drop.
Economists aren’t predicting that home prices will rise much, if at all, on a national basis this year because a large “shadow” supply of potential foreclosures has yet to work through the market. Even if prices do rise, it will be years before many borrowers who owe more than their homes are worth will have equity in their homes again.
In a sign that the still-slow economic recovery is wearing on consumer psyches, the Conference Board said Tuesday that its Consumer Confidence Index fell slightly in April, the second consecutive month of decline, and remains at recessionary levels. Consumers were feeling more upbeat about the job market, but continue tofeel uneasy about the state of the finances and the economy’s overall direction.
“We’re still in a slow period…. We’re still in a funk,” said Robert Shiller, the Yale University economist who co-founded the index that bears his name.
Tough credit standards and negative sentiment about homeownership also stand in the way of a full-fledged housing recovery.
But housing demand has risen modestly from a year ago, lifted by low mortgage rates and an improving jobs market. “It certainly is a reasonable thing, if you want to own a home, to buy right now,” Mr. Shiller said.