Housing Prices Show Signs of Stability

Good news for real-estate agents: In a recent Gallup poll of trustworthiness, they ranked higher than lawyers, a turnaround from a 2008 survey. And they continue to leave telemarketers, members of Congress and stockbrokers in the dust.

The public even may start to believe the message from the National Association of Realtors, advertised throughout the housing debacle, that this is “one of the best times to buy a home.”

Sinking prices have made a mockery of their exhortations, but the S&P/Case-Shiller index of home prices in 20 major cities is showing signs of stabilizing. And, if it stops falling when the March reading is released Tuesday, it would mark the first time since last August that the index hasn’t shown a month-over-month decline.

Meanwhile, other housing gauges using different methodologies already appear to be turning the corner. CoreLogic’s national home-price index perked up in late winter and has risen in recent months at the fastest pace since the bubbly spring of 2006. And the Federal Housing Agency’s purchase-only house-price index rose 1.8% in March from the prior month.

With the Case-Shiller index down 35% over six years and mortgage rates hitting record lows, affordability has improved. The National Association of Realtors’ Housing Affordability Index for the first quarter was at its highest level ever.

Supply and demand are playing a role, too. In early 2006, housing starts peaked near 2.3 million on an annualized basis. They crashed below 500,000 by the spring of 2009 and have climbed back to just over 700,000 in April. That is still below the pace of household formation, which is close to one million.

Any recovery will be a far cry from the good old days, though. Home-price tracker Zillow Inc. reports that 31% of borrowers remain “underwater” on their mortgages and so are unable to sell even while there is a backlog of homes yet to enter foreclosure. And household income will have to rise when mortgage rates increase from today’s artificially low levels to keep affordability constant.

So it is premature to predict a boom. But if prices really are turning the corner, that has positive implications for banks’ and consumers’ balance sheets.

Don’t take a real-estate agent’s word for it, but prices don’t lie.

– Spencer Jakab

online.wsj.com

Elaine
DRE #00598428
Senior Director, Coldwell Banker New Homes Division
With over 200 condominium, townhome and loft projects successfully marketed

“Fewer properties for sale with such remarkably low interest rates make it a great time to buy and not a bad time to sell”

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