Did the U.S. housing market finally hit its long-expected bottom? One data source insists the bottom has been reached, while two others strongly disagree.
According to Seattle-based Zillow Inc., home values have reached a bottom. Zillow says that its latest home value index rose on an annual basis for the first time since 2007, increasing 0.2% year-over-year to $149,300. Values have risen for four consecutive months, Zillow adds, and 53 of the 163 metropolitan markets covered by the company's research posted annual increases in home values.Â
‘After four months with rising home values and increasingly positive forecast data, it seems clear that the country has hit a bottom in home values,’ says Zillow Chief Economist Stan Humphries. ‘The housing recovery is holding together despite lower-than-expected job growth, indicating that it has some organic strength of its own."
Zillow adds that national foreclosure levels have been declining since January, when 7.9 out of every 10,000 homes were lost to foreclosure, and foreclosure resales also fell, making up 15.6% of all sales in June.
However, new research from New York-based Radar Logic Inc. insists that proclamations of a housing bottom being reached are premature.
‘Those people looking at current results and calling a bottom are being dangerously shortsighted,’ says Michael Feder, Radar Logic's CEO. ‘Not only are the immediate signs inconclusive, but the broad dynamics are still quite scary. We think housing is still a short.’
While Radar Logic's data shows that home prices have exhibited more strength to date in 2012 than they have over the same period in the preceding three years, the company warns that the relative strength in home prices thus far this year does not necessarily indicate that home prices have hit a bottom. Radar Logic theorizes that this year's mild winter weather temporarily boosted demand, thus creating an early uptick in housing demand that may come at the expense of weakness in demand later this year.
‘From one year to the next, price trends tend to vary much more in the second half of the year than in the first,’ says Quinn Eddins, director of research at Radar Logic. ‘We will have to wait to see data for October or later to know whether 2012 will turn out to be a good year or a bad year for home prices.’
Also taking a more cautious approach is Standard & Poor's (S&P) Ratings Services, which predicts home value declines later in the year.
‘We expect these drops to occur in tandem with new foreclosed properties reaching the market later this year,’ says Erkan Erturk, S&P credit analyst. ‘The U.S. economy is currently growing at too slow a pace to have an impact on the housing market, and we believe that certain economic factors, such as weak employment growth and the euro debt crisis, could somewhat stymie the housing recovery.’
The S&P/Case-Shiller 20-city home price index rose 1.3% month-over-month in April after a seven straight month drop. Prices are currently 34% below their mid-2006 peak. CoreLogic's home prices rose 2.5% in April and 1.8% in May, the second and third straight monthly increases, respectively.
Going forward, S&P expects it will take roughly 11 years from now for home prices to climb back to their mid-2006 peak, assuming a home-price appreciation rate that is in line with a 4% household income growth rate. This would put home prices back at their prior peak sometime closer to 2023.