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U.S. existing home prices stabilized month to month in April

06/28/2011 by Alex Carrick, RCD Canadian Chief Economist

There were month-to-month increases in the April data on single-family home resale prices in the U.S., according to S&P Case-Shiller. Versus March, the 10-city composite index nudged up 0.8% and the 20-city composite index rose 0.7%. These were the first gains in eight months.

On a year-over-year basis, the results weren’t as positive. The 10-city composite index fell 3.1% compared with April 2010. The 20-city composite was 4.0% below the same month last year.

As for the good news with respect to the month-to-month change, S&P Case-Shiller admits it’s not sure whether or not the result was due to the onset of the usual spring-summer home-buying season when warmer weather and the imminent end of the school year usually bring out homebuyers.

The report provides several enlightening comments on the overall U.S. housing market. The pace of foreclosures is apparently easing slightly. Starts and resale activity may be improving to some minor degree, although remaining well below year-ago levels. Also, lending institutions have clearly tightened their requirements for mortgage approvals.

In April, six of the 20 largest U.S. cities recorded new lows in the six-year housing crisis that has engulfed the nation – Charlotte, Chicago, Detroit, Las Vegas, Miami and Tampa.

On average nation-wide, U.S. home prices are back to where they were in 2003. Existing home prices are down more than one-third versus where they were at their peak in 2006. In at least three cities – Las Vegas, Phoenix and Miami – home prices have fallen by more than half.

The S&P Case-Shiller report lays out some other shocking comparisons. In Phoenix and Atlanta, home prices have nearly fallen back to where they were in January 2000. In Cleveland, Detroit and Las Vegas, home prices are actually lower now than they were 11 years ago.

On a year-over-year basis, Minneapolis (-11.1%) was the only large city to record a double-digit decline in home resale prices in April.

Moving in the other direction, Washington D.C. (+4.0%) was the only city to record a year-over-year increase in home prices in the latest month.

S&P Case-Shiller posts the results from its home price survey (actually conducted by Fiserv, Inc.) on the last Thursday of each month. The indices have a base value of 100 in January 2000.

The appearance of Miami among the cities with a new low obscures a developing story. Perhaps the latest data hasn’t caught up with one trend that’s become apparent to real estate agents.

A separate report that appeared a couple of weeks ago on the Bloomberg News website focused on the interest that citizens of Brazil have shown in the Florida housing market.

Brazil’s inflation-adjusted growth rate of nearly 5.0% has helped push forward citizens of that nation into the forefront of foreigners looking for international real estate bargains.

Other reasons given for Brazilians being so interested in U.S. property is the surge in prices in their own home market plus a 45% appreciation in the value of their domestic currency, the real, versus the U.S. dollar since 2008. Miami’s condo market has been a prime beneficiary.

Canadians and Venezuelans are the other two categories of foreigners that are seizing the opportunity and satisfying their taste for Florida homes.

The month-over-month gains in the latest Case-Shiller report do offer the hope that the U.S. housing market may be stabilizing near the bottom. At the very least, the “free fall” seems near an end.

Some signs of dawn at the end of six years of darkness in homebuilding would be a huge bonus for consumer confidence. Individuals and families derive a great deal of their sense of self-worth, not to mention their actual assessments of private wealth, from the home(s) they own.

The latest reading on U.S. consumer confidence from The Conference Board recorded a drop in June to an index value of 58.5 (1985=100) from 61.7 in May. The confidence indicator has been trending down over the past four months since it reached a post-recession high of 70.4 in February at the start of this year.

The distressed housing market, high gasoline prices and weak labour markets have been a nasty three-some draining away confidence.

Meanwhile in Canada, on the subject of confidence, Statistics Canada recently published information on 2009 median incomes for individuals and families across the nation.

The results confirm the overall impression of where the strengths and weaknesses lie. Some cities with close ties to resources have been making substantial gains. Urban areas dependent on old-line industries that struggled during the recession suffered losses.

St. John’s, Nfld. (+5.0%), Saint John, N.B. (+2.9%), Ottawa-Gatineau (+2.3%), Regina (+2.3%) and Saguenay, Que. (+2.1%) recorded the largest gains in median total family income between 2008 and 2009. In Ontario, Greater Sudbury (-5.7%) and Windsor (-4.9%) were unfortunate in recording the largest drops.

As for the ranking of median family incomes by census metropolitan areas (CMAs), the leader was Ottawa-Gatineau ($89,410) followed by Calgary ($88,410), Edmonton ($86,250) and Regina ($83,550).

Those four cities have strong employment representation in high-tech, government, raw materials and the energy sector. The fact that jobs in such areas lead to a high ranking on the income scale should come as no surprise to anyone.


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