Tuesday, August 25, 2009

S&P/Case-Shiller Price Index Turns Positive For June

June of 2009 was a positive month for home prices across most of the nation, according to today's S&P/Case-Shiller Home Price Index report. The release indicated that home prices in the 10 and 20 city composite rose 1.4% MTM. More impressive though, was the news that the 2nd quarter as a whole posted positive price action compared to the first quarter - the first quarterly gain recorded in three years. The chart above illustrates the well-defined trend which began somewhere between March and April of 2009, and characterized by a stabilization of sorts in US housing prices. Other notable observations:
  • Cleveland once again posted the strongest MTM performance, with a 3.8% rise in house prices. Las Vegas was the loser, with a -2.86% decline in home values.
  • Dallas home prices held up the best over the past year, only declining 2.27%. Las Vegas home prices logged a -32.42% YOY price performance, the worst in the nation.
Today's report indicated that, potentially, the adverse pricing effect of foreclosures is beginning to moderate. My read is that the unprecedented level of foreclosure activity will continue to hold down the headline average and median prices for most of the nation's metropolitan areas. However, this report may be a signal that foreclosures will no longer contribute to percentage declines in the headline. The high volume of foreclosure activity recently - they represented roughly a third of July's existing home sales - indicates that for the most part, foreclosures are priced at a level attractive enough to spur investment. I haven't seen any valid data yet showing what proportion of foreclosure sales are being completed by funds investing in distressed real estate, but I suspect that this sort of opportunistic buying is strongly contributing to the uptick in activity.
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