Home Prices Heading Up, But Haven’t We Seen This Before?
According to the S&P/Case-Shiller Home Price Indices, home prices are going up all over the country. Do these increases signal that we’ve reached bottom and are heading into a period of sustained price increases?
In my last blog I said that S&P/Case-Shiller 20-metro composite index had risen for the last three reported months in row (that’s April, May & June, because of their reporting lag). I remembered that in the last couple of years we had seen another time or two when the long downhill slide hit a price-rise bump, only to turn back down, and more than lose whatever had been gained.
So I thought it would help to compare this time to the recent prior upturns to see if we can get a clue whether this time will be different.
Let’s put the current increase in perspective. From March to June of this year the 20-metro composite index has gone up from 137.63 to 141.30, an increase of 3.67 points. (Remember that these numbers measure home prices at a point in time compared to the price pegged at a value of 100 in January 2000.) This 3-month period of increases feels minor compared to the initial 33 consecutive months of decrease in home prices during the initial sustained slide in prices from the July 2006 peak. During that slide the index fell from a high of 206.52 to 139.26, a loss of 67.26 points. That makes our recent 3.67 point uptick seem minor indeed.
Notice that initial slide ended at 139.26, in April 2009, and we’ve just passed through that same price territory this spring, two years later. What’s happened in the meantime?
Two years of comparatively shallow rises and falls in prices leaving us close to where we started at the bottom of that first slide. Two periods of consecutive months of price increases occurred but were not sustained. Six months of increases totaling 6.51 points, turned into 5 months of price decreases, then 4 months of increases totaling 5.55 points, were followed by a tumbling of prices down to 137.63 this last March, lower than the initial low point nearly two years earlier.
Just from looking at this recent history, our three-month, 3.67 point string of consecutive increases does not look very impressive. At 141.30 points in June, we haven’t gotten close even to where the index had climbed to even just last July, 148.98 points.
One positive sign is the geographic breadth of the current upturn. With the sole exception of Las Vegas, home prices in every other one of the 20 metropolitan areas have increased during this current 3-month March –to-June run. Of these 19 areas, 14 of them had increases in every single month, indicating some consistency within each market as well as across the whole country.
But this was all before the debt-ceiling fiasco, the Standard & Poor’s U.S. credit rating downgrade, and steep dives in both the stock market and in consumer confidence. Sorry to say, the recent signs are not promising for a steady and consistent increase in home prices.