Are homeowners to brace for bad financial weather for longer?
The US has recovered from the recession and housing bubble decline, and things look up for real estate….didn’t they?
Not so fast. Marketwatch reports that the Case Shiller home price index shows a not-seasonally adjusted .2 percent drop for 20 major American cities for December 2009. Prices did rise in a bit of a quick payday for Los Angeles, San Diego, Phoenix and Las Vegas, however. Adjusting for the season, the price rose .3 percent that month. That could be similar to the math used to calculate the unemployment rate?
It isn’t an improvement; only a decrease of decay
The pace of deterioration has stabilized for now, David Blitzer of Standard & Poors tells Marketwatch. However, the rate of improvement seen during the summer of 2009 has not been sustained. Over the past year, sources indicate the average national home prices have dropped 2.5 percent.
Home prices and personal wealth decay together
There will always be the obvious connection between a drop in personal wealth and falling home prices. This is because a home is typically the most valuable asset a person has in their financial arsenal. The burst of the housing bubble induced more people into saving when spending would bolster the economy better. Prices, according to the Case-Shiller index, are currently at summer 2003 levels.
Thats good, so long as we arent creating another bubble
Joshua Shapiro of MFR Inc. tells Martketwatch that things aren’t as rosy as one might think. It could be that the homeowner tax credit is propping up the positive signals on the Case-Shiller index. More foreclosures could be in store. While much of the impact of the sub-prime disaster on prices at the bottom end of the market may well be behind us, there is likely more pain to come further up the price spectrum, Shapiro said.
Is a new housing bubble being created by Congress?
Many economists are predicting a similar forecast for disaster on the horizon. The pretense at a quick payday, if it’s artificial, could be a screen for worse things ahead. Buying should be approached with caution, which it always should be, in boom or bust.