The most recent S&P/Case-Shiller Home Price Indices was released on Tuesday and the news wasn’t as optimistic as we would like but not altogether surprising either. The S&P/Case-Shiller monthly report is the leading measure of U.S. home prices and on Tuesday, they reported that – in their 20-city composite – housing prices fell 1.6 percent from their November 2009 levels. Sixteen of the 20 cities in the index showed a year-over-year decline and 19 of the 20 metros showed a decline from the month prior (October 2010).
However, the composite indices remain above their spring 2009 lows.
When can we expect home values to rebound? Unfortunately, it will still take some time. And let’s take these numbers in perspective: a 1.6 percent decline, year-over-year, remains a modest drop. Yes, we would like to see the numbers go in the opposite direction but as far as drops go, 1.6 percent isn’t terrible.
However, we will probably continue to see declines in home prices for the next few months due to the many foreclosures currently on the market that need to cycle through as well as the many new foreclosures expected to hit the market at the beginning of the year. Many experts are predicting this to be a “mini-dip” in the market while the excess supply gets sorted out but that home prices should increase toward the middle to end of 2011.
Besides home prices expecting to increase toward the end of the year, there is another piece of data that offers some optimism. Home sales have been on the rise recently, topping an annual rate of 5 million sales in December 2010. This is great news. Yes, inventory is high due to the excess number of distressed properties on the market – but the amount of homebuyers out there is high as well. People are choosing homeownership over renting because of it is often much more affordable to buy than to rent. Additionally, many investors are picking up multiple properties since home prices and mortgage rates remain so competitive, real estate is a great investment right now.