The home buyer tax credit juiced home sales and prices by a lot, but prices then dropped precipitously in 2011. Home prices dropped a full 4 percent from 2010 to 2011 on both the CoreLogic and the Realtors’ index. The S&P/Case Shiller national home price index was down 5 percent from Q2 2010 to Q2 2011. In addition to recovery from a hangover, this year mortgage rates are a full percentage point lower than they were in July of 2011, which creates much more purchasing power/stimulus, thereby skewing the comparison even more. (For More: Home Prices on the Rise)
“Bottom line, when you un-adjust, normalize, handicap, overlay stimulus periods, and analyze -- based on the massive increase in rates driven purchase power, the distressed mix shift positive skew, pulled-forward effect, and the overwhelmingly more positive sentiment -- the June year-over-year Case-Shiller indices only up 0.1 percent and 0.5 percent respectively and July CoreLogic Home Price Index only up 3.8 percent can be viewed as ‘net’ house price depreciation…and should be very disappointing for those looking for ‘escape velocity’ and a ‘durable recovery,’” says housing analyst Mark Hanson.
We are comparing home prices now to the double dip in home prices that we saw last year. On S&P/Case Shiller, the national home price index in Q2 2012 is actually down, just under 1 percent from Q2 2009, which was just when the tax credit began but hadn’t fully affected price readings yet. DataQuick shows home median prices at the end of July up 7 percent from a year ago, but up just 4.6 percent from three years ago.
None of this is to say that we are not seeing recovery in housing. It is just important to keep this recovery in perspective, especially when mortgage rates and distressed homes still play such a large role in these monthly numbers. Any shift in either of those categories could have a material effect on the numbers that we watch so closely each month and which play such a critical role in overall housing sentiment.
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