The Home Buyer's Korner

Information presented should be used for educational purposes only.

April 29th, 2015

Guy looking up in color

Case-Shiller for February 2015

Case Shiller

Home prices continued to rise modestly in February, according to the most recent Case-Shiller index, which underscores concerns that home buyers’ incomes aren’t keeping pace. Within the report, it points out smallish increases in home prices nationwide.  However, when you compare the increase to stagnant wages any increase only pushes home ownership farther away from many would-be home buyers.  First time home buyer only account for about 30 percent of all purchasing, but to have a sustainable housing market and larger growth in the overall economy we need about 40 to 45 percent of the market to be first time home buyers.

On the opposite side of the spectrum, home values are roughly back where they were in 2003 when inflation is taken into account. Current real prices are nowhere near their peak by contrast with prices about 21 percent lower. That leaves many current home buyers underwater and unable to sell their homes. The obvious solution appears to be wage increases that would help all Americans, but Hollywood East doesn’t have the stomach to rise minimum wages or create any stimulus like bridge building or road repairs to boost the economy due to political reasons, so we on Main Street remain stuck with children living in our homes we can’t sell.

The Index has been moving sideways for the last six months or so, with year-over-year increases at about 4.2 percent. Both the 10-city and 20-city indexes saw larger year-over-year increases in February than in January. The 10-city index gained 4.8% from a year earlier, up from 4.3% in January. The 20-city index gained 5% year-over-year, compared with a 4.5% increase in January.

Prior to that in October 2013, the Index was up 10.9 percent compared with a year earlier, which in retrospect looks like the high point of a post-recession bounce. At that time, Wall Street was concerned about creating conditions for a new housing bubble, but despite low-interest rates and pent-up demand for housing, prices haven’t bubbled up, primarily due to Main Street still not seeing the recovery we funded for Wall Street, but the favor yet to be returned.

Real Estate RecoveryIn other reports distressed housing sales classified as REO and short sales accounted for 13.5 percent of total home sales nationally in February, that’s a 3 percent year-over-year decline and a 0.8 percent decrease from January, although distressed sales tend to drop in the winter. In any case, this February’s distressed sales share was the lowest for any February since 2008 and the one bright note that our shadow inventory of home are much less of a drag on the residential market than they used to be.

 

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