Yes, house prices in the US climbed in the second quarter of the year. No, that’s not cause for optimism or even relief.
First the announcement from S&P (emphasis ours):
Data through June 2010, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index rose 4.4% in the second quarter of 2010, after having fallen 2.8% in the first quarter. Nationally, home prices are 3.6% above their year-earlier levels.
A few problems, some of which we covered last week.
The news on housing since the end of the second quarter has been atrocious. Not only did sales of new and existing homes plummet in July, but the length of time if takes to sell homes on the market started climbing again — implying future price declines.
Calculated Risk notes also that government efforts and distressed sales would have distorted the seasonal adjustment on these numbers. And barring some new development, these government efforts (which weren’t exactly wild successes to begin with) have run their course.
From the summary by David Blitzer, chairman of S&P’s index committee:
The worry starts when you remember that the Homebuyers’ Tax Credit has expired, foreclosures are still at high levels, and July data on home sales and starts were very, very weak. The inventory of unsold homes and months’ supply data were particularly troubling. If this relative weakness in demand continues, it will likely filter through to home prices in coming months.
And a lot of potential home sellers haven’t faced up to reality. Or as David Rosenberg said in one of his recent morning notes (emphasis ours):
Not so fast. The fact that existing homeowners were stubborn and refused to discount was one of the reasons why sales slid a record amount in July, but reality will eventually set in that to move the near-record inventory, it will be the asking price that inevitably approaches the bid, not the other way around.
If you’re looking for a silver lining in the S&P numbers, you might say that at least they contained no surprises, and actually beat the consensus estimates.
But you might be deluding yourself.
Related links:
S&P/Case-Shiller Home Price Indices – Standard & Poor’s
US housing: bad to worse, then worse again – FT Alphaville