It's more of the same when it comes to home prices this fall. After some encouraging news about housing starts and existing home sales over the past few weeks, it seems real estate values will remain in the doldrums for the time being.
Nationally, home prices returned to levels seen in the first quarter of 2003, according to Standard & Poor's latest Case-Shiller home-price indexes. That's not too surprising if you've been keeping your thumb on the pulse of the housing market, but it's still disappointing and yet another reminder that we have a long way to go in this recovery.
"Nobody should be surprised by further home value losses in the remaining balance of this year and into next year," Stan Humphries, chief economist at real-estate website Zillow, wrote in an E-mail. "Despite record high affordability of real estate, the psychology of home buyers is still being [weighed] down by economic uncertainty, keeping them on the fence when it comes to buying homes."
Three cities—Atlanta, Las Vegas, and Phoenix—posted new crisis lows, a development David M. Blitzer, chairman of S&P Indices' Index Committee, called "disturbing." Over the past several months, only prices in Las Vegas, one of the epicenters of the overbuilding and foreclosure crisis, were weakening. Now it seems progress in other hard-hit markets has started to crumble. Atlanta saw prices drop almost 6 percent from August to September, down nearly 10 percent since last year. Prices in both Atlanta and Las Vegas have now fallen below their January 2000 levels.
On the bright side, Blitzer and Humphries say the nose-diving home prices seen back in 2007 to 2009 seem to be behind us.
"We do expect foreclosure liquidation rates to increase in the coming months as banks try to unload their backlog of foreclosures accumulated in the post robo-signing period," Humphries said, adding that more foreclosures on the market will put more downward pressure on home values. "The good news is that we expect these remaining home value losses to be relatively minor in comparison to the declines from the market peak to current levels."
Home price declines seem to be leveling off a bit, but economists still expect further declines before the market hits bottom. The news is bittersweet, underscoring the probability that there will be more pain before there is any gain in the housing market.