Prices of single-family homes across the nation rose in November at the slowest rate in more than a decade, a housing index released Tuesday by Standard & Poor's showed, countering other evidence that the housing slowdown may be nearing an end.
The S&P/Case-Shiller composite index showed a 1.3 percent year-over-year increase in the price of a single-family home based on existing homes tracked over time in 10 metropolitan markets.
For its 20-city composite index, prices grew 1.7 percent, the slowest rate ever for that data, according to the S&P index committee chairman, David Blitzer. That data has been collected since 2001.
"The weakness continues to spread," Blitzer said. "I don't see any signs of a bottom. Unfortunately, it's still looking pretty nasty from a housing point of view."
The last time the growth dipped lower than 1.3 percent for the 10-city index was in September 1996, when it measured 1.2 percent.
First -- the data record is only 5 years old for the 20-city composite index. In addition, the index was started just before the housing bubble started. So comparisons with the last 5 years are to a period of higher-than-average growth.
However, a slowdown in appreciation indicates sellers are just starting to get the message there is too much supply on the market.
On a related note,
"We have more than a million housing units of excess supply," said James O'Sullivan, an economist for UBS. "If you are looking for evidence that the worst is over for housing, you're not going to find it in this report. This argues that housing starts need to go down more."
In other words, don't expect a housing price rebound anytime soon.
5 comments:
Question: Does the high debt to earnigs ratio of the average American in any way affect demand/prices?
It should, although I haven't seen any hard evidence. Total household debt is now over 90% of GDP and 120% of national disposable income. Debt payments from income are at a record.
At some point, those numbers will take a toll.
That is something we will see ... what complicates the question is that much of the debt is tied up in mortgage lending. Indeed, one of the ways that debt has been leveraged so high is by people refinancing to pay off credit card debt.
It certainly does seem that high levels of indebtedness copmbined with slower growth of capital gains in home equity means that consumer spending is unlikely to be the growth driver that pulls the economy out of a general recession ... that leaves investment-led growth, export-led growth, or government deficit spending to prop up the economy.
What saved Australia from a national recession when its housing bubble burst was the resource boom of Queensland and West Australia ... that is, export-led growth ... but New South Wales did not participate in that expansion, and had negative state GDP for 2006Q3. It may therefore be in a regional recession already ... we will see when the 2006Q4 GDP numbers come out.
So that is one scenario ... if a growth driver emerges to take up the slack, but it is regionally clustered, we might see the national economic recovery continue, combined with areas of regional recession.
Perhaps it is an oversimplification to consider the housing market as a single entity.
It would seem that there are at least three markets: the subprime, the average family and the luxury sector.
The subprime has already been discussed at length and is doing poorly (and apparently dragging some lenders down with it).
The middle market should be doing OK as incomes have started to rise slightly, interest rates are stable, if slightly high, and people are becoming more optimistic again.
The luxury market should be immune to economic conditions. In my upscale neighborhood the prices of the most expensive houses are still going up and tear downs still happen to million dollar houses.
I'd like to see a discussion by sector. After all John Edwards claims we have two Americas. Perhaps it's really three.
That leaves me with a very practical question. What then are the prospects for a sale of an existing home on the market, when the sale is due to estate settlement? No-one in the family can keep my mother's home -- waterfront in Florida -- for the property taxes are prohibitive at our incomes. I live in a different region of the country, so I have no realistic assessment of what the trends there are at present.
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