Housing…Up Again?

Life's a swirl!

Inquiring minds are reading an article from The Economist, Up Again, and wondering how is the US real estate market up?

According to the non-seasonally adjusted data (which, Standard & Poors tells us, may be more reliable at the moment) every metro area (except Las Vegas) recorded an increase in its price index from April to May. Both national indexes also rose on a monthly basis, and the year-over-year increase in May marked the fourth consecutive annual rise.

It that good news? Is that really right?

It could certainly be worse, but there are several complicating factors to consider. First, index values are computed as a three-month moving average, and so May prices reflect the average of transactions in March, April, and May. These are also closed sales, with contracts concluded a month or two prior to May. Why is this relevant? Because the price data is based entirely on transactions originated before the government’s housing tax credit expired. Most other housing market variables were also rising before the end of the credit, only to tumble back after its expiration. So the index will likely turn down in the months ahead.

Also, there is this to consider:

To a certain extent, it’s worth remembering, this is a sideshow. Prices in bubble markets—Phoenix, Las Vegas, and Miami, for instance—remain massively off peak levels (in Las Vegas’ case, 56% below peak) with no prospect of returning to previous highs for years, if not decades. In these cities, walking away may begin to look like a reasonable idea for a majority of homeowners. And that obviously will impact the supply of foreclosures, which will hold prices down for longer.

There is much more to this very good article. Please take the time to read it in its entirety.


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