Home Prices Are Up, But…Posted on September 1, 2011 by
The Standard & Poor’s/Case-Shiller home-price index shows prices increased in June from May in 19 of the 20 cities tracked. A separate figure shows prices rose 3.6% in the April-June quarter from the previous quarter. Those numbers are not adjusted for seasonal factors. Over the past 12 months, home prices have declined in all 20 cities after adjusting for seasonal factors. Chicago, Minneapolis Washington and Boston posted the biggest monthly increases. Metro areas hit hardest by the housing crisis, including Las Vegas and Phoenix, reported small seasonal increases.
Despite the uptick, the numbers contain “really no hope of any kind of surge,” David Blitzer, S&P Index Chairman David Blitzer said. “None of the fundamentals look that good,” he said.” People still have difficulty getting mortgage loans; they still have difficulty in refinancing. The banks got a lot tougher and haven’t gotten any easier no matter how you measure.” Blitzer said the housing market is taking on a regional perspective, with the Sun Belt continuing to languish and other areas of the country stabilizing. “You have to look much more into details,” he said. “You’ll some good times here and there but it’s a thin river of hope overall.”
Fed for more “easing?”
According to Chicago Fed President Charles Evans, the Federal Reserve may get even more aggressive in its easing policies than it has been so far unless the economy shows significant improvement. In his view, QE needs to stay in place until unemployment plunges to 7% or if inflation gets past 3%. Core inflation, which strips out food and transportation, is about 1.8%, though the number is 3.6% including the more volatile measures. “Strong accommodation needs to be in place for a substantial period of time,” he said. “If we could sort of make everybody understand that this is going to be in place for a longer period of time, we could knock out some of that restraint that comes about when people talk about premature tightening.” Since the financial crisis hit in 2008, the Fed has expanded its balance sheet past the $2.5 trillion mark and kept its funds rate near zero in an effort to stimulate the economy. It has not worked – the housing market is worse than Great Depression levels, recent manufacturing readings have been around contraction levels and weekly jobless claims have stayed above 400,000.
NAR – pending sales slip
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, slipped 1.3% to 89.7 in July from 90.9 in June but is 14.4% above the 78.4 index in July 2010. The data reflects contracts but not closings. The PHSI in the Northeast declined 2.0% to 67.5 in July but is 9.7% above July 2010. In the Midwest, the index slipped 0.8% to 79.1 in July but is 18.8% above a year ago. Pending home sales in the South fell 4.8% to an index of 94.4 but are 9.5% higher than July 2010. In the West the index rose 3.6% to 110.8 in July and is 20.6% above a year ago. Lawrence Yun, NAR chief economist, said sales activity is underperforming. He followed that observation with his typical hopefulness: “The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy. [But we] also need to be mindful that not all sales contracts are leading to closed existing-home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations, and streamlining the short sales process.”