U.S. Home Prices Slip

The Standard & Poors/Case Shiller Homes Price Indices, released on Tuesday, showed that U.S. home prices in August 2010 were still higher than a year ago, but down when compared with July.

October 27, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user pnwra

The Standard & Poors/Case Shiller Homes Price Indices, released on Tuesday, showed that U.S. home prices in August 2010 were still higher than a year ago, but down when compared with July. The index of housing the 20 largest U.S. metro markets dropped 0.2 percent month-over-month, while the index of the 10 largest metro markets lost 0.1 percent.

The metro area with the largest month-to-month drop in home prices was Phoenix, still one of the epicenters of the housing slump; it was down 1.3 percent. Dallas, which has not been an epicenter of the slump, lost 1.1 percent, second only to Phoenix. Metro Detroit showed unexpected strength, with its pricing up 0.5 percent, the highest among the 20 metro areas for the month. Chicago was second, with a 0.4 percent gain.

“A disappointing report,” noted David M. Blitzer, chairman of the index committee at Standard & Poor’s, in a statement. “The housing market appears to have stabilized at new lows. At this time, it does not seem that any of the markets are hanging on to the temporary momentum caused by the homebuyers’ tax credit.”

Apartment Rents, Occupancies Up

On the other hand, the apartment market continues to show signs of strength (for landlords, that is). On Tuesday Apartment Realty Advisors released its 3Q10 market update, which covers 30 metro markets nationwide. Most of those markets experienced increases in both effective rents and occupancies.

In fact, 25 of the 30 markets experienced increases in effective rents compared with 2Q10. Five markets–Cincinnati, Dayton and Columbus, in Ohio, along with Las Vegas and Salt Lake City–experience no quarterly change. No markets saw a drop. Twenty-one markets saw increasing occupancies, while eight registered no change. Only one metro market, Portland, Ore., saw a decrease in occupancies.

New construction was another story. Of the 30 markets covered by the ARA report, only one saw an increase in new construction: Boston. The vast majority saw no change–that is, no change from weak construction activity in most cases–and the rest saw a drop from sluggish to even more sluggish. The upside in this dynamic for existing apartment owners and investors is little competition in the pipeline.

Sluggish Times Ahead, Predicts MBA

The Mortgage Bankers Association’s latest economic forecast is predicting that U.S. GDP will eke out 1.5 percent growth in the third quarter of this year, and then 1.9 percent in 4Q10. Will next year be better? Only a little. The MBA believes that growth for the economy in 2011 will barely break 2 percent each of the four quarters, and only in 2012 will it break 3 percent. That amounts to treading water.

Other dour predictions for 2011 and ’12 from MBA: U.S. unemployment will only be down to 8.7 percent by the end of 2012; the trade deficit will continue (an oddly precise $359.2 billion is predicted for 4Q12); and personal consumption will barely grow more than 2 percent per quarter, if that.

U.S. consumers weren’t paying attention to the MBA. According to the Conference Board on Tuesday, its confidence index was up to 50.2 in October from 48.6 in September. That’s still low, but not as low as it has been lately. Consumers cheered up just a little as the discouraging summer of ’10 came to an end.

Wall Street nearly broke even on Tuesday, with the Dow Jones Industrial Average up a scant 5.41 points, or 0.05 percent and the Nasdaq gaining 0.26 percent. The S&P 500 did break even.