Realty Check

Have Home Prices Hit Bottom?


For the first time in seven months, as recorded on the S&P/Case Shiller Home price Indices saw month-to month gains. The press release even referred to it as a “spike.” A 1.3 percent rise for the 10 and 20 city composites. When you seasonally adjust, the number dips to 0.7 percent, but it is still in the positive, and these days in housing, that apparently constitutes a spike.

“Some of this is probably because this is the spring selling season really hitting its stride,” notes S&P’s David Blitzer, “but certainly not all of it. My guess is half of what we’re seeing is real gains, not just seasonal shifts.”

The biggest gains came in some of the hardest hit areas, where investors rule the market and where they’re finding fewer and fewer homes to buy. Phoenix saw a whopping 8.6 percent annual jump in home prices, while Miami also saw healthy gains. Atlanta is still a sore spot, with home prices down 17 percent annually, thanks to a still huge supply of foreclosed homes.

So is this the end? Have home prices nowhere to go but up? The analysts aren’t so sure.

“We are coming back and this looks like a solid turn. It’s going to take a few more months to cement all the evidence in place, but it looks very good,” said Blitzer.

Others say this may be more about foreclosure delays and limited supply, which could change this summer.

“It’s unlikely that house prices can continue rising at this sort of pace for much longer,” warns Paul Diggle at Capital Economics. “After all, the tight supply conditions that have led to sharp price gains are unlikely to persist now that banks appear to be processing foreclosures and short-sales at a quicker pace.”

While it may be tempting to call a bottom to prices, HIS Global Insight’s Patrick Newport warns it is, “premature to do so.” He also cites a large foreclosure pipeline and the possibility of a weakening economy. “The most likely scenario, in our view, is that home prices will zigzag over the coming months, rising during the selling season, slipping in the fall,” says Newport. “We are expecting home prices to cautiously start moving up in 2013, however.”

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