It’s up. For now…

August 24, 2009

by Scott Sambucci

6 comments

The latest S&P/ Case-Shiller Home Price Index numbers for June 2009 are scheduled to release tomorrow, so I wanted to take a moment to highlight what to expect in the coming months.  There’s been some modest cheering about the slowing decline of the Case-Shiller index from March to April and its upward tick from April to May.  As we’ve been reporting since the early summer, this turn in the market isn’t much of a surprise to us here at Altos Research.  We’ve watched prices climb steadily through the Spring, with June seeing the peak of ask prices across the country:

The Altos 10-City composite tracks the same 10 cities as the S&P / Case-Shiller Index

The Altos 10-City composite tracks the same 10 cities as the S&P / Case-Shiller Index (Graph provides both 7-day weekly observations and 90-rolling average values)

More importantly, we’re already looking ahead to this month’s data (oxymoron intended…) and to the Fall season.  While the prices of homes exiting the market climbed throughout the summer, they are flattening ever so slightly and the new listings entering the market are doing so at consistently lower price levels now:

Tracks the prices of homes entering and exiting the US resale housing market

Prices of homes entering and exiting the US resale housing market (Calculated on a 90-day rolling average basis)

Why are the price levels of new listings particularly important? Because at the hyperlocal level, agents and brokers use the most recent contracts, pendings, and sales as a baseline for recommending listing prices to their clients.  New entries into the resale market reflect sales activity before the contracts even close.

Need some more proof? Take a look at the percentage of homes on the market with price reductions and the magnitude of those price reductions:

Percent of on-market homes with Price reductions since January 2009

Percent of on-market homes with Price reductions since January 2009

Measures the magnitude of price reductions for on-market homes that have dropped their asking price

Measures the magnitude of price reductions for on-market homes that have dropped their asking price

Earlier this Spring, higher market activity created an more favorably environment for sellers – fewer homes on the market in July and August have had price reductions (~37%) compared to homes on the market in April (~43%).  The magnitude of those price reductions fell from ~11% to ~9.5% (sellers are dropping their prices by less and less).  However, in both cases, the rate of these declines are clearly slowing.

The next couple of weeks will be pivotal to the US housing market.  As the Labor Day holiday nears and the Fall selling season hits, we’ll be watching to see if inventory levels climbs (they’ve been mostly stable to declining nationally for most of 2009) and if the existing homes on the market continue their asking price trending activity.  There’s the daunting end of the home buyer tax credit and foreclosure activity seems to be difficult to interpret.

Comments are always welcome…

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