Been down so long, it looks like up

September 29, 2009

The latest S&P Case-Shiller home price data is feeding into the feel-good vibe of the moment, of mergers the Dow approaching 10,000 and other green shoots. The composite index of home prices for 20 U.S. metropolitan regions rose 1.6 percent in July from June — a stronger gain than expected and the third consecutive monthly gain. As the release notes, there have now been “six months of improved readings,” and this is giving some early support to stocks and the dollar.

Yet the year-over-year rate remains well in negative territory: a 13.3 percent decline for the 20-city index and a 12.8 percent decline in the 10-city index. Yes, 17 of the 20 cities had monthly gains, but 14 are still showing annual declines in the double-digits.

David Blitzer of Standard & Poor’s says:

We do need to be cautious in coming months to assess whether the housing market will weather the expiration of the Federal First-Time Buyer’s Tax Credit in November, anticipated higher unemployment rates and a possible increase in foreclosures.

And Calculated Risk puts it in perspective:

The debate continues – is the price increase because of the seasonal mix (distressed sales vs. non-distressed sales), the impact of the first-time home buyer frenzy on prices, and the slowdown in the foreclosure process (with a huge shadow inventory), or have prices actually bottomed? I think we will see further house price declines in many areas.

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