Home Price Rise Leads To Very Cautious Optimism
Marketers generally rejoice at the news of rising housing prices. Besides indicating a bit of consumer optimism about the future, it usually means demand is up and that folks will be buying new appliances, services and tchotchkes to fill upgraded abodes. And so, there’s a reason for some cheer this morning as USA Today is among the media prominently reporting that “record low mortgage rates and some of the cheapest housing prices in decades spurred some long-desired home sales,” according to the S&P/Case-Shiller composite index of U.S. home prices, which rose 1.3% for the month of April.
"All the headlines are positive on house prices, and this is important because they've been going down for five years," UBS Investment Research economist Maury Harris tells Tim Mullaney. "It's a confidence builder at a time when Americans really need something good happening."
Bill Briggs’ report on MSNBC.com is a bit less effusive.
“Prices twitched a tinge higher as values in the ‘sand states’ further firmed while listings in some key northern cities continued to chill,” he writes, also suggesting that banks are holding some foreclosed properties off the market in an attempt to pump the value of more desirable stock.
“We can see on the street what’s vacant and what’s not. We’re watching these (foreclosed and non-listed) houses just sit and rot,” Michelle Tremblay, a Realtor with West USA Realty in Phoenix, tells Briggs. “The banks are letting these houses just deteriorate.”
Still, “economists were optimistic that the uptick in prices was significant and that real estate may be contributing again toward building American wealth,” writes Alejandro Lazoin the Los Angeles Times.
PBS News Hour correspondent Paul Solman certainly takes a lot of positive out of the news in “The Business Desk” (which is “not a blog but a "q-and-a" [pronounced "quanda"] … whose premise is “there are no stupid q's), even while cautioning that we should not read too much into a single month's data. Of the top 20 metro areas, only Detroit failed to gain, he says, “not that you'd necessarily know the good news from today's headlines,” which tended to be less positive than he is.
Solman also points to a Wall Street Journal report that home prices in Ireland have risen for the first time since the collapse of the market there five years ago despite all of the current uncertainty over the euro.
“A cosmic conjunction, perhaps,” Solman writes. “Now if only the same thing could happen in Spain.”
Don’t start getting too giddy about all this news, Binyamin Appelbaum points out in his “Economix” blog in the New York Times. Despite carrying the optimistic hed “We All Start Small,” Appelbaum douses the blanket with three cold buckets of caution:
- We’re at the “bottom of a very deep hole.” (We can only hope we’re at the bottom, a pessimist might respond.)
- The index tracks homes closed from February to April, which means that the dealmaking took places even earlier. Although warm weather generally is better for home sales than cold, it was a very warm winter.
- Finally, there’s less stock out there. Housing inventory has fallen for 15 months -- just plain folks, like the banks cited above, may be waiting for conditions to improve before listing.
If they are holding on the widespread assumption that owning a home traditionally represents the best financial investment that the average Jane and can make, one commentator to Appelbaum’s blog points to a dispiriting analysis.
That home your great-great-grandfolks bought for $10,000 in 1890? Well, it’s “nominal” value may be $390,000 -- presumably not counting the sun room and half bath you “forgot” to get a building permit for -- but its “real” value is flat, Catherine Mulbrandon writes on her VisualizingEconomics blog.
So don’t be planning to double your marketing budget just yet in anticipation of getting a healthy slice of that pent-up demand. In fact, the Conference Board’s Consumer Confidence index dropped to 62, a five-month low, from 64.4 in May, Bloomberg’s Michelle Jamrisko reports. Even falling gas prices, which you’d think would make driving around looking for a new home more appealing, aren’t cheering up the hoi polloi, but BNP Paribas economist Yelena Shulyatyeva says the “employment situation” is weighing heavily on their minds.
The jobless rate was 8.2% in May, up from 8.1% in April. “It has held above 8% for 40 consecutive months, the longest stretch of such elevated levels in the post-World War II era,” Jamrisko points out.
News like that could put a damper on anyone’s enthusiasm in these uncertain times when even the time-honored tradition of haggling the asking price seems daunting to some people.
“Recent media reports that real estate bidding wars are back look likely to do damage to the slight uptick we’re seeing in the housing market,” Broderick Perkins blogs on Forbes.com. “They’re frightening off potential homebuyers who feel they’re not going to get the house they want at the price they can afford.”