Floor for home prices?

Recent data, such as new-home starts and existing-home sales, have offered some glimmers of hope. The release of the S&P/Case-Shiller index for October shows additional slippage in prices.

But the rate of decline in the index, which tracks home prices in 20 metropolitan areas, is expected to continue slowing, to less than 3% year over year. That trend, some economists expect, presages prices finding a floor in 2012.

“We are not expecting to see a housing market that could be described as strong. But despite the downward revisions to sales, a modest recovery may be under way,” said Paul Dales, an economist at Capital Economics. Prices could stop falling next year, he said, but it will take until 2014 for markets to show sustained gains.

National Association of Realtors Reports overstated, but…

The National Association of Realtors said Wednesday it over-estimated home sales by 14.3% between 2007 and 2010, meaning that 2.9 million fewer homes sold during those years than thought earlier.

But the report also provided fresh signs that housing is improving with sales in November showing a rise of 4% from October’s levels, putting sales to a seasonally adjusted annual rate of 4.42 million… the second-highest level of the year.

The inventory problem…

The Realtors’ report showed that housing inventory declined to 2.58 million in November, down 18.1% from one year ago to the lowest level since the spring of 2005.

Buyers remain frustrated by inventory that they say is unattractive or overpriced. A shortage of inventory is causing buyers to walk away because there just isn’t anything to buy that meets their requirements.

This could be the biggest problem with the real estate market today.

Low inventory is normally a sign of health for housing markets because reduced competition can result in higher prices. But many real-estate agents say markets are stalled now because sellers aren’t willing to reduce prices further and are keeping their homes off the market rather than settling with buyers seeking deep discounts.

The Wall Street Journal, December 22, 2011
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