The S&P Case-Shiller Home Price Index was just released for the month of April. For eight months the 20 City Composite Index has been dropping. In April that streak was snapped with a 0.7% increase.
While April beat March, year over year prices were still down 4%. Contributing to the better month-over-month performance is the recent decline in foreclosure sales, with a decline of 16% this year. Along with an increase of 11% in non-distressed property sales, prices would rise. Obviously, fewer foreclosure sales at the same time as more owner normal sales should result in a bump in prices.
Various estimates range from 33% to 40% of current sales being foreclosures or short sales. This depresses pricing overall significantly. Ben Bernanke states the obvious when he says
“…if we can reduce the current number of maybe 40% of home sales which are on a distressed basis, that would do a lot for stabilizing the market and helping give people confidence that they can buy and not be buying into a falling market.”
The fact that prices picked up in April isn’t something to get too excited about, as every spring there is upward pressure from more buyers entering the market. However, the report was better than most analysts were expecting.
Freddie Mac Is More Enthusiastic
Freddie Mac chief economist Frank Nothaft said the overall economy should begin to accelerate in the second half of 2011 with an improved housing market close behind. Nothaft expects the unemployment rate to be around 8.6% by the fourth quarter, and mortgage rates should stay between 4.5% and 5% through the end of the year.
Consumer confidence hit a six month low in May, with a corresponding drop of 15.3% in existing home sales. Builder and business owner confidence lingers at historically low levels. It will take positive signs like a drop in unemployment and firming of home prices to get buyers back into the market.
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