While the actual sales numbers are taking a dive and expected to continue their decline, CNN reports that home prices may actually be stabilizing. Can this be possible?
Home prices rose slightly in May compared with a month earlier, appearing to have stablized at the lower levels that followed the end of the residential real estate bubble, according to the S&P/Case-Shiller Home Price Index of 20 major housing markets released Tuesday.
Prices were up 1.3% from April, and 4.6% from 12 months earlier. The news isn’t all rosay as the widespread speculation is that the price rise might have reflected one of the last gasps of the government’s incentive program, which paid tax refunds of as much as $8,000 to homebuyers if they signed a sales contract before May 1.
“It does look like the market was boosted by the tax credit,” said Robert Dye, senior economist for PNC Financial Services. “It seems to have pulled some of the demand forward.”
What do you think the next few months holds for the real estate market?
Consumer confidence dims as home prices advance Single-family home prices rose more than expected in May, still reflecting robust spring sales spurred by now-expired homebuyer tax credits, …
Consumer confidence dims as home prices advance Single-family home prices rose more than expected in May, still reflecting robust spring sales spurred by now-expired homebuyer tax credits, …
US May home prices gain but no sustained recovery ”There is still a huge amount of supply on the market but sales appear to have improved enough to stabilize prices,” said Christopher Low, chief economist …
Consumer confidence dims as home prices advance Single-family home prices rose more than expected in May, still reflecting robust spring sales spurred by now-expired homebuyer tax credits, …
There is no way that home prices have reached a bottom. I analyzed the data in the NAR Home Affordability Index (HAI) from 1/1989 thru 5/2010 and found that the Median of the Ratio of Median Home Price to Family Income is 2.92 and the Average of the Ratio of Median Home Price to Family Income is 3.07. The lowest reading over this same period occurred in 12/1990 at 2.654. Therefore, it is safe to say that from a historical perspective the typical price of a median home should be about 3 times the median family income. The 5/2010 reading was just under 3 at 2.965. The problem is that we are not in a “typical” economic environment – we have record foreclosures that seem to persist and 10% unemployment. Given that the lowest reading of 2.654 occurred in 12/1990 and that our current economic conditions are far worse than 12/1990, it is logical to conclude that the ratio should be below 2.654. If the ratio declines to 2.5, home prices will decline by nearly 19%. If the ratio declines to 2.5 and family incomes decline by 5%, home prices will decline by nearly 25%. Given that personal incomes are declining and that a 2.5 ratio is probably a bit optimistic, I believe it is very feasible that home prices will decline by an additional 30%.