EDITOR’S NOTE: Good News for the Housing Market?

By Keat Foong, Executive Editor The latest media reports appear to involve some mini-celebration about a brightening housing market, or at least a suspension, temporary or otherwise, of the continuing drop in home sales/prices. Some commentators suggest that the trends may signal that the bottom of the housing market has been reached. The Commerce Department reported that new single-family home sales increased in June by 11.0 percent from the previous month, to an annualized rate of 384,000 units. This is the third consecutive month of increase in the sales figure. The seasonally adjusted estimate of new houses for sale at the end of June was 281,000 units. This represents a supply of 8.8 months at the current sales rate, said the Census Bureau. And while the Census reported that median price for a new house stood at $206,200 in June, down 12 percent from June 2008, the Standard & Poor’s Case-Shiller Home Prices Indices show that the annual rate of decline in its 10-City and 20-City Composites improved for the fourth consecutive month in 2009. S&P said 17 of the 20 metro areas studied showed improvement in their annual returns compared to those of April. On a monthly basis, the Composites reported positive returns for the first time since the summer of 2006. “To put it in perspective, these are the first time we have seen broad increases in home prices in 34 months. This could be an indication that home price declines are finally stabilizing,” stated David M. Blitzer, chairman of the Index Committee at S&P.For the apartment sector, an improving housing market may mean an easing of pressure from the massive numbers of condominiums and for-sale homes placed on the market as rentals (ie. the shadow inventory). If these homes can be sold and absorbed, they will no longer be rented out. However, there are a lot of ifs to the equations. Note that home sales levels are still way below those in the same period in 2008, according to Census numbers. And S&P says that as of May 2009, average home prices across the U.S. are at similar levels to those in 2003, “indicating that the three years of appreciation that occurred from 2003-2006 were all given back in the following three years.” From the peak in the second quarter of 2006, the S&P Case-Shiller 10-City Composite is down 33.3 percent, and the 20-City Composite is down 32.3 percent. Sixteen out of 20 metro areas are reporting double digit declines. At the worst, Phoenix and Las Vegas home prices have fallen 54.5 and 53.4 percent respectively. Also, it has been said that the uptick in sales is a result of the lower prices, or greater numbers of auctions. And that many of these buyers are investors who are turning right around and renting out the units again. Unemployment is still rising, which could mean even fewer buyers down the road. And, it has been pointed out the 11 percent increase in home sales may be statistically insignificant even according to the Census. Perhaps only if it is the case that real home buyers are returning to the market should that be bad news for the apartment market. According to National Multi Housing Council Chief Economist Mark Obrinsky, in general, a weak housing market—despite the shadow inventory—may be on balance a plus to apartment rentals. That’s when consumers continue to stay away from the home buying market in droves.