Did the Housing Market Just Hit Bottom?
Real Estate data firm CoreLogic (NYSE:CLGX) reports that home prices in May rose for the second straight month, up .8% in May on the heels of a 1.3% rise in April. More importantly, excluding distressed sales (short sales and sales of foreclosed homes) prices were up 1.3% for the month, an encouraging sign for a housing market that many believe has been skipping along its bottom for some time.
CoreLogic’s Chief Economist Mark Fleming commented, “Two consecutive months of month-over-month growth and continued relative strength in the non-distressed market segment are positive seasonal signs in the housing market.” April and May mark the beginning of the prime of the housing season, so its encouraging that prices are on the rise in these months. Case-Schiller also reported this week, in its monthly survey of the housing market, that prices were on the rise nation-wide for the first time in eight months.
Despite incremental gains in the last two months, home prices are still mired in a deep slump. According to CoreLogic, home price index declined by 7.4% in May, after a 6.7% drop in April, relative to last year. The housing index is also down 32.7% from highs in 2006, or 21.7% excluding distressed homes.
Many economists, including Fed Reserve Chairman Bernanke, are blaming a flood of outstanding inventory (mostly foreclosed homes) for keeping home prices down, and expect that the market will not fully recover until those properties are cleared. Bernanke stated last week that it would take longer than expected (multiple years) for the housing market to recover, with investor John Paulson in accord, predicting a lagging market for another 18-24 months.
Get Actionable Investing Insights: Check Out Wall St. Cheat Sheet’s newest Feature Trades of the Month!