Mark Davis, chief economist at Moody's Analytics, believes that the worst may be over for the troubled housing market in the United States. He is not alone in this sentiment: a senior economist at Bank of America also thinks that home prices will finally stop the vertiginous path of descent they have been on over the last few years, and the Chief Economist at Zillow believes the trough is near.
Respected financial news outlet Bloomberg conducted a series of telephone interviews earlier this week among economists at prominent companies dedicated to researching the American housing market. Mr. Davis at Moody's believes that any home sales currently taking place are being settled at prices higher than the bottom. He feels this is the case for existing homes, as well as for new constructions.
The optimism emanates from the closely followed Standard & Poor's Case/Shiller home price index, which recently indicated that home prices in 20 major metropolitan areas across the United States fell for the sixth month in a row. The data reported by Case/Shiller considered the six months preceding the end of February 2012. The optimistic economists are looking at two important factors: on a year-over-year basis, prices dropped by a margin of 3.5 percent, the lowest margin observed since the first quarter of 2011, and March sales are more than seven percent higher than last year. Another figure that is at a two year high is the number of signed pending sale agreements.
The U.S. Commerce Department revised its February home sales to 353,000 -the highest February on record since 2009. This is in addition to positive figures reported in relation to consumer confidence, which is being bolstered by an American job market that is slowly improving.
Home Prices will Improve Slowly
None of the economists polled by Bloomberg believe that prices will recover in the next few months. There is still a significant supply of properties in mortgage delinquency or foreclosure status. Sales will pick up, but prices can still fall even as the pace of sales picks up. The main obstacle is the sheer number of American properties that qualify as distressed: approximately six million. As these homes join the sales listings, prices are bound to edge down.
Ms. Meyer from Bank of America believes that while a housing bottom could be called now, home prices are not likely to improve until 2014. At that time they may experience an improvement of 2.5 percent, added Meyer.
When those highly anticipated gains in home prices finally arrive, they are not expected to rise uniformly across the country. Some markets will improve at much higher rates than others. Price improvements will more than likely not be observed month-to-month, but rather on a year-over-year basis.