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Extra8/18/2009 12:01 PM ET

Is the worst really over for home prices?

Recent data appear encouraging, but a closer look reveals reasons for skepticism. Even if prices stop falling, it may be years before they rise sharply again.

By The Wall Street Journal

So, is our long national nightmare over? Has the housing market finally hit bottom?

There has been some muted -- albeit exhausted -- cheering from homeowners in recent weeks. But before we break out the champagne, look out for further potential problems just down the road.

Get more housing market news

Get more housing market news

The good news? According to the closely watched Case-Shiller Home Price Index, which tracks home prices across 20 major cities nationwide, the three-year housing slump slowed sharply in April and May.

May's decline was just 0.2%, the slowest in two years. And several cities actually saw prices rise -- among them Denver, Washington, D.C., Chicago, Boston, Cleveland and Dallas.

Even Miami only fell about 1% in May. That's a great month down there. Previously, prices had been falling 3% a month.

We'll get an even better picture of the situation when the Case-Shiller figures for June are released on Aug. 25.

But these data aren't the only hopeful signs.

Inventories of unsold homes have come down. According to the National Association of Realtors, there were about 3.8 million unsold homes on the market at the end of June. That's down a long way from 4.5 million a year ago.

And yes, housing affordability is dramatically better. People, obviously, need to live somewhere. At some point, housing gets cheap enough that the fundamentals start to look good.

The average home is about a third cheaper than it was at the peak three years ago, a plunge unprecedented since the Great Depression. In the hardest-hit places, such as Phoenix, Las Vegas and Miami, average prices have been halved or better from their bubble peaks.

Factor in falling mortgage rates as well, and housing starts to look cheap by many measures. Thirty-year mortgage rates, at around 5.5%, are still low by historic standards. A few months ago, when they fell below 5%, they were very cheap.

There's some other good news for homeowners from the rest of the economy. July's job losses were better than feared: The unemployment rate, which was heading vertical a few months ago, eased to 9.4% last month from 9.5%.

Some are saying the worst is behind us, for the economy and the housing market. No wonder the iShares Dow Jones U.S. Home Construction exchange-traded fund (ITB), which tracks shares of home-building stocks, has bounced sharply since early July.

So, is that it?

Not so fast.

Continued: Don't let them fool you

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Tuesday, August 18, 2009 11:08:27 AM
Based on current incentives with the robust market of the Spring and Summer, real estate appears to have bottomed, but remember that there are a larger number of people under water in their mortgages.  With trying to refinance to a lower rate, but sales values sliding most are not able to qualify.  With banks focusing on refinance and purchase transactions, there will most likely be  a back log of short sales and foreclosures that will come about during the fall and winter with the expiration of several incentives and a slower time period for the lending institutions. 
Tuesday, August 18, 2009 11:45:33 AM
"BuildmorePrisons" said it very well.  There is a huge downside, as many hundreds of thousands of folks have lost their jobs.  They simply will be unable to pay the mortgage, so the defaults and foreclosures will continue for the next year or two, hopefully not more.  Add to that all the households under water on their mortgage and you can safely assume that most markets will have excess housing for years to come.  All that if the economy starts adding significant jobs each month.
Tuesday, August 18, 2009 12:47:50 PM

hmmm...I think someone removed my comment by mistake......Here it is again....

 

These idiots from mainstream media still think that the Stock market is the indicator of and driving force of the economy, how stupid?....

I really think that the economy drives the stock market first then maybe the market can help influence the economies direction....what a bunch over-educated boneheads these so called economists that's the whole Macroeconomics mumbo jumbo from Harvard & Columbia Business Schools...Not to mention those Bureaucrats running the most of the media who think that people are fools...
 

Keep trying to tell the people lies and maybe they will come true? For some reason I hear stuff like this and think of DisneyWorld, not sure why that is though.....

Just goes to prove that intelligence can not transfer to wisdom, if you are not willing to gather information from reliable resources and proper analyze it before going forward...

Most of the stock Market is not driven by smart decision making it is driven by the power of the money itself...Like the old saying When you have enough money you can make things happen.

I am willing to bet that the housing starts are generated on an investment level and not demand....everything else indicates that new housing development is not logical.

=======================================================

Secretary Donovan from the Department of Housing and Urban Development has announced the awarding of over $1 billion to state housing finance agencies through the American Recovery and Reinvestment Act. HUD's Tax Credit Assistance Program will allow 26 state agencies (including the Ohio Housing Finance Agency) to resume funding for affordable rental housing projects across the nation. The expected outcome is an increase in the number of quality affordable housing options while stimulating the hard-hit construction trade. Priority will be given to projects that start immediately, so that the positive effects from this project can be seen in Ohio and elsewhere as soon as possible.

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With special interest groups like the Un-American Socialist Nazi Mobsters in Congress/Senate what do you expect?
===============================================================

Tuesday, August 18, 2009 2:00:53 PM
I've had it with all of these articles. We bought our house at the top of the market - then it crashed. Despite me losing my job and my husband's income been reduced by 15% (thanks Arnold) we are continuing to pay our mortgage, barely. Don't know how much longer we can keep going and Wells Fargo won't work with us on a loan modification. If "they" really want to fix this - they need to actually help out the middle class instead of giving big $ to these banks who are doing NOTHING (Wells Fargo is currently only modifying about 5% applicants)
Tuesday, August 18, 2009 2:02:52 PM

Let's see Deutsche Bank just came out with a report that says 48% of US mortgages will be underwater by 2011. Foreclosure rates are climbing. There are over six months of houses for sale right now. That doesn't count the foreclosures coming on the market. Most of the sales going through are cash or a large down payment. We are still losing 250,000 jobs a month and we need to create 125,000 for new workers coming into the work force so we really need to create 375,000 jobs just to get to break even. That doesn't create any jobs for those who have lost jobs. After that we need

 

I have a house for sale, totally remodeled in Greenville SC and it is selling for $60k less than replacement value and the only buyer I had; couldn't get financing even though he had a credit score of 800 and not debt.  The Great Leader Obama has said the worst is over so it must be so.

Tuesday, August 18, 2009 2:50:40 PM
  Wells Fargo  also working on a loan modification for my wife and I since 7/8/09. Have not heard anything as of today. If they do not offer the obama plan that I heard of which is 2% interest and 40 years were out of here. Our income has gone down $1000.00 per month. Paying credit cards, car payment,medical bills ,mortgage and all other everyday expenses is becoming almost impossible.Have not worked since Jan.21 2009 and finding a job at age 55 is a bit tough. I'm not whining ,just telling you how it is for me. I'm sure there are many more cases that are much more trying than mine. I just wish everybody needing help good luck.
Tuesday, August 18, 2009 3:08:53 PM
i hope to get the obama plan {2% interest or 38% of income}.i need help to pay the mortgageOpen-mouthed
Tuesday, August 18, 2009 3:38:15 PM

4CYFI is on target.

When Obama said "we need to give the wealth back", a bunch of folks thought that he meant them.

Well let's see who got it

GM and Chrysler $50 billion

AIG $160 billion

Goldman Sachs more billions

Bank of America more billions

Seems to me that the Obama voters all got duped. Let's hear a big cheer for hope and change 

Tuesday, August 18, 2009 3:57:30 PM

cacatuo, stalde,

It would be prudent for you both to find other living quarters. The Obama plan is mostly myth. Very few will actually be helped it's just more smoke and mirrors. After all Obama's buddies on Wall St. and Fannie&Freddie the trial lawyers and fat cat bankers that were all among his biggest campaign contributors need the money more than you

Tuesday, August 18, 2009 4:53:05 PM

If people learn from this experience instead of blaming others or hoping that someone will rescue them, then we may be ok.  Read the small print and do your due diligence.  Many of today's miseries could have been avoided had this been so. 

 

I'm a single mom.  Just lost child support because my son turned 18.  (But he is still here so my expenses haven't changed)  We've had to make some adjustments to live within our means, but because I was the ant instead of the grasshopper we are in pretty good shape.

 

At this point the past should only be a lesson for the future.  My heart felt wishes for those of you whose lesson was especially tough.

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