In the last week, a slew of economic reports and news articles have suggested that the U.S. housing market has bottomed out.
Don’t believe it. More pricey areas, often in large metro areas, still have plenty of room to fall.
You wouldn’t know it from Tuesday’s release of the National Association of Realtors’ index, which showed that nationally pending home sales had increased from the levels of one month ago.
Also on Tuesday, homebuilder D.R. Horton reported smaller losses, a day after Pulte Homes Inc. and Centex Corp. said that orders for new homes had been increasing.
And there was plenty of excitement last week after the S&P Case Shiller index seemed to show a mild rise in month-over-month prices for existing single family homes.
Well, not so fast. In reality, the seasonally-adjusted version of the Case Shiller index – which came out later in the day, after the initial headlines had been written — reveals a continued month-to-month decline from April to May. And the year-over-year decline remains around 17 percent.
The reason to expect further declines in some areas is that the U.S. housing market has now bifurcated. It’s true that some areas with lofty rises (and subsequent severe falls) may have stabilized.
Not so some of the more expensive areas, especially those in metro areas with houses that are over $750,000, which also experienced skyrocketing prices (a two- or three-fold increase since 2000 wasn’t unusual) but are taking much longer to revert to normal.
Put another way, the U.S. housing collapse is affecting different markets differently. The yet-to-fall areas represent a small stock of the overall housing market, under 5 percent of the total, but a much greater share by total price.
The San Francisco Bay area is another example. Residential real estate throughout the metro area zoomed upward throughout the bubble, and has fallen dramatically in areas like Antioch, where prices per square foot have dropped from $240 in late 2007 to around $100 today. The ratios are similar for Vallejo and Richmond.
Then again, asking a Realtor whether it’s a good time to buy a house is a little like asking a used car salesman whether it’s a good time to buy an automobile. Let’s not forget that another economist for the National Association of Realtors, David Lereah, was the soothsayer who published a book titled “Why the Real Estate Boom Will Not Bust – And How You Can Profit from It” a few months before the housing bubble started to burst. He is, to put it delicately, no longer employed by the association.
A better way to come up with a prognosis might be to invoke another real estate agent maxim: location, location, location. Assuming the economy doesn’t decay further, some areas may be stabilizing. But in many others, a historic boom means the historic bust is still to come.
By : Declan McCullagh / CBSNews.com
Finally- Somone in the media that gets it !
