The S&P/Case-Shiller composite index of 20 metropolitan areas slipped 0.5 percent in June from May, bringing the measure down 15.9 percent from June 2007. But the June price index was actually an improvement.Why? The 0.5 percent month-over-month drop in the 20-city index was the smallest since July 2007. And in June, nine of the 20 cities tracked showed home price increases compared with seven in May, and just two in April, S&P/Case-Shiller said.
The California Association of Realtors (CAR) also reported that home sales soared 43 percent in July, year-over-year. This was in part because median existing-home prices had fallen 40 percent, and 30 percent plus of sales were either REOs or short sales. Buyers are flooding back into the market. And the "C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in July 2008 was 6.7 months, compared with 10 months (revised) for the same period a year ago," said the CAR.
While this does not signal an end to the housing recession, it does show that home prices are back to affordable levels. Nationally, existing-home sales rose 3 percent in July, though the 11-month inventory of homes on the market wasn’t reduced. This means that there is still a tremendous backlog of surplus homes on the market waiting to sell in places like Arizona and Florida, including bank-owned properties and short-sales.
New-home sales also showed a slight improvement, up 2.4 percent in July. New-home inventories improved, falling slightly from 10.7 to a 10.1-month supply. The reason is fairly simple. Builders are offering more incentives, including money to buy down the interest rates. The median-sales price is now down 6.3 percent to $230,700 from July 2007, according to the Commerce Dept.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 3.1 percent to a seasonally adjusted annual rate of 5.00 million units in July from a downwardly revised level of 4.85 million in June, but are still 13.2 percent lower than the 5.76 million-unit pace in July 2007.
And the national median existing-home price for all housing types was $212,400 in July, down 7.1 percent from a year ago when the median was $228,600. So the price bottom may not have been yet reached. Economists are saying that only a continuation of sales’ increases will cause prices to stop falling—maybe by the end of the year.
© Harlan Green 2008