The recently-released Case-Shiller Home Price Indices for August 2012 bring good news. Home prices nationwide are rising, and have consistently done so for the last 12 months. This is the first time American home prices have shown a positive annual growth rate since 2010. In 2010 the positive growth was tied to a federal home-buyer credit. The current growth is independent of any temporary incentives, and represents the first organic annual growth since the housing bust in 2006.
We may now be looking at “exactly what we needed for a sustained recovery; monthly increases coupled with improving annual rates of change,” according to David Blitzer, Chairman of the S&P Index Committee. Mr. Blitzer is referring to the combination of positive factors that showed up in this month’s report – monthly increases in home prices and positive rates of change nationwide.
The increase in home prices – 1.2 percent in the second quarter of 2012, versus the second quarter of 2011 — is modest compared to the bursting bubble of a few years ago. But many experts are highly optimistic that the U.S. housing market is beginning to recover. All three indices are up – the 20-city composite, the 10-city composite, and the nationwide composite – despite a few cities showing negative growth. But even those cities whose numbers are down show growth when compared to their lowest points. Condo prices are also up in all five cities measured, and consumer default rates are down. The big picture: these numbers offer a clear sign that we have finally hit the bottom and the worst is behind us.
This doesn’t mean that our housing woes will end any time soon. Underwater mortgages remain a major problem in this country, affecting millions of homeowners. Also, consumer confidence is low and will sink even lower if Congress stalemates on budget talks again this year and popular tax cuts and incentives expire.
“It’s too soon to call the bottom,” says Robert Shiller, Yale Professor and Case-Shiller co-author, but “some people will kick themselves for not buying now.” Rising home prices and record low interest rates make this a very tempting market for the buyer. For those who have been waiting for further drops in prices, now is the time to make a move.