Here's something you might be interested in.
San Diego County home prices climbed 2.5% from June to July, according to Case-Shiller/Standard & Poor's data released this morning (Sept. 29). Only three of the top 20 metro areas did better. San Diego prices had risen a lesser 1.6% from May to June. Prices are down 12.3% from a year ago. Earlier, the year-over-year decline had been about twice that. Prices are now down 40% from their peak in November of 2005. The annual rate of decline for the 20-city composite continues to decelerate, notes Standard & Poor's economist David M. Blitzer. However, he warns that the first-time buyer's tax credit is scheduled to expire in November. Higher unemployment rates and a possible increase in foreclosures could also hamper the seeming recovery.
San Diego County home prices climbed 2.5% from June to July, according to Case-Shiller/Standard & Poor's data released this morning (Sept. 29). Only three of the top 20 metro areas did better. San Diego prices had risen a lesser 1.6% from May to June. Prices are down 12.3% from a year ago. Earlier, the year-over-year decline had been about twice that. Prices are now down 40% from their peak in November of 2005. The annual rate of decline for the 20-city composite continues to decelerate, notes Standard & Poor's economist David M. Blitzer. However, he warns that the first-time buyer's tax credit is scheduled to expire in November. Higher unemployment rates and a possible increase in foreclosures could also hamper the seeming recovery.
Response to post #1: There are several factors. Interest rates have been manipulated downward by the Fed. Mortgage rates are probably 1 percentage point lower than a rational market would dictate. Short rates are zero, which means that there is a lot of carry trade activity -- people borrowing dollars for almost nothing and investing the money elsewhere. The buyer's tax credit is artificial. Officials are trying to put a lid on foreclosures, but I don't think they will be successful. However, there is an ocean of liquidity out there. The Fed and Treasury are trying to create another bubble. Could it be in stocks or residential real estate? Hard to say. I don't know why in the world they want to create another bubble after all the miseries the world has been through from the recent burstings and trauma. I believe the officials figure that an asset bubble is more politically palatable than product and service inflation. Best, Don Bauder
It's called a "dead cat bounce".
After the summer house buying season, the prices will be back on their downward trend.
Until we reach some kind of reasonable income/housing cost ratio, it's inevitable that prices will continue to adjust.
Response to post #3: I think there is a lot of gambling money in residential real estate. When you are lending money at zero percent or slightly above short term, and mortgage rates are artificially low, there are all kinds of carry trade possibilities for speculators. If there is another round of foreclosures, as some say, then that will balance off the speculative money moving in. Best, Don Bauder
Today our local real estate rag, the U-T, had a long sad story about the plight of veterans who are finding it very hard to put their VA mortgage benefit to use. Seems that many homes are getting snapped up with all cash deals, or by buyers with lax lenders. The VA requires more paperwork, and is tighter on appraisals. Sellers will take a smaller price if it goes with minimal hassle. Can't blame them for that.
But where are all these buyers coming from, especially those with all cash offers? I can't tell, but such a market does say that there is liquidity, lots of it, out there. It also says that the smart money is getting back into residential real estate.
Once that tax credit expires, much of the wind in the sails of this market will be gone. Then what happens? Stagnation again, or further declines in price? This market could scrape along for years before there is any sort of a permanent uptrend.
Today's mortgage applications report shows a surprising 7% drop.
If Uncle Sam has substantially already bought the lower end of the market and now the upper parts of the sector are only selling again because prices are falling, it would seem Case Shiller could give a false picture as to rising prices for a considerable time yet, as the upper end property is added to the mix.
http://sites.google.com/site/evernewecon/home/realestate#illusion
Response to post #5: S&P is cautious about reading too much into this trend of rising prices, which has gone on for several months. S&P warns that troubles lie ahead. Best, Don Bauder