Last Tuesday another housing market obstacle appeared in the form of Standard & Poor's Case-Shiller Home Price Index for March. Prices for 20 major metro areas dropped 0.8% for the month and were down 3.6% from a year ago. These numbers had some folks claiming the double dip in housing prices had arrived. But Case-Shiller's longer term data reveals that in their 20 measured metros, home prices are still UP 38.2% since January 2000.
Hopefully, we won't need the patience of a Michelangelo waiting for the housing market to achieve normalcy, but most of today's economic geniuses say we'll have to hang in there a bit longer. On the plus side, new single-family home sales for April were UP 7.3%, beating expectations two months in a row. For the first time in nearly four years, sales were up in every region. Inventory fell to 6.5 months, its lowest level since 1963 and the median price was UP 4.6% from a year ago. On the minus side, the Pending Home Sales index was down 11.6% for April after two months of gains. April wasn't the greatest home shopping month, with widespread severe weather, the heaviest rain in 20 years and rising oil prices slowing things down.
People wonder if housing is moving in the right direction, especially after April Housing Starts fell 10.6% to an annual rate of 523,000 units. But a closer look reveals the decline was due mostly to multi-family units, which are volatile month to month and actually up 6.6% from a year ago. Also, the biggest drop was in the South, which had been hit with severe tornados. Outside that region, starts were UP 5.5%! Homes under construction are at their lowest level since 1970, so some areas may rebound from shortages in the next few months. Following a March rise, Existing Home Sales were down just 0.8% in April and the seasonally adjusted annual rate is still above 5 million. Total inventory edged up to 9.2 months.
Our resolution to succeed in the real estate market was given a bit of a boost with the National Association of Realtors (NAR) report that existing home sales were up 8.3% in the first quarter over the fourth quarter of last year. Plus, on a quarter-to-quarter basis, sales rose in every region of the country. Year-over-year, sales were virtually flat, slipping just 0.8% to a seasonally adjusted annual rate of 5.14 million homes.
For those of us with a strong will to succeed in this housing recovery, the way appears to be by focusing on the extraordinary affordability of today's residential market. Part of this affordability lies in the fact that mortgage rates fell again for the third week in a row, according to Freddie Mac's weekly survey of national average rates for conforming mortgages. This drop took them to their lowest point of the year. The Mortgage Bankers Association (MBA) weekly survey reported demand for purchase loans was UP a seasonally adjusted 0.3% from the prior week.
Last week's reports showed the progress of the housing market recovery is definitely on a zigzag trajectory. Zigging upward were new home sales, UP a strong 11.1% in March, hitting the 300,000 threshold annual rate. The supply of new homes dropped to 7.3 months and the inventory fell again, to its lowest level since 1967. Also zigging UP 5.1% were March Pending Home Sales, which measure contracts on existing homes and point to continued gains in existing home sales come April and May.
The housing recovery isn't yet a success, but last week gave us a few good reasons to keep plugging along. First came March Housing Starts, bursting UP 7.2% to a 549,000 unit annual rate. February starts were also revised UP 6.9%. Then we found out new Building Permits surged 11.2% in March to a 594,000 annual rate and were revised UP 3.3% for February. Starts and permits are still down over 13% from a year ago, as residential construction has dropped to only 2.3% of GDP, its lowest level on record. But economists say it won't go much lower, and that's what these latest numbers are signaling.
Optimists received some encouragement from data aggregator CoreLogic, who reported that home prices fell again in February, but the price drops appeared mostly with distressed sales--short sales and bank-owned homes, otherwise known as REO properties. Excluding these, the CoreLogic index was essentially flat, down just 0.1% versus a year ago. Their Chief Economist commented, "When you remove distressed properties from the equation, we're seeing a significantly reduced pace of depreciation and greater stability in many markets." During the month, 6 out of 10 of the country's biggest markets saw home price APPRECIATION in non-distressed sales.
Those of us who think we can participate in a housing market recovery sooner rather than later just got welcome support from some industry experts. As reported by Fortune on CNNMoney.com, "After four years of plunging home prices, the most attractive asset class in America is housing." Research firm Metrostudy, which tracks new-home inventories for 65% of the U.S. market, reports that the steep drop in construction over the last few years has reversed the supply glut, with starts now well below closings. The firm believes the low inventory should eventually lead to higher prices.
Patience has certainly been needed to weather the ups and downs of the current U.S. housing market. But as we await strong recovery, we can take heart in positive signs when they show up. Last week we had the report that Pending Home Sales were up 2.1% in February. This measure of contracts on existing homes indicates sales should rebound in March following February's drop.
